We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Mixed
Gold
Bullish
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • The Aussie sell-off halted at key lateral support this week and puts the focus on a break of this key range. Here are the levels that matter on the AUD/USD weekly chart. Get your $AUDUSD technical analysis from @MBForex here: https://t.co/rU4u1tMlmz https://t.co/QbyxUrDq1a
  • The $JPY market faces a clear disconnect between domestic economic data and monetary policy. What if that were to change? Get your market update from @DavidCottleFX here:https://t.co/4Gr8tLaHvj https://t.co/0eXMv5CTnd
  • #Forex Forecast via @DailyFX: US Dollar Technical Outlook on $DXY, $AUDUSD, $USDCAD, $USDJPY & $EURUSD Full Analysis ⬇️ https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/11/17/usd-price-us-dollar-chart-forecast-dxy-audusd-usdcad-usdjpy-eurusd.html
  • Further escalation in Hong Kong will likely bode poorly for risk appetite https://t.co/0NjUd3ahBu
  • How should you trade around event risks and what steps can you take to improve your trading psychology? Find out from @JoelKruger, a trading consultant and mentor. Only on Global Markets Decoded. Missed the episode? Read up here:https://t.co/JWIGJk4vKa https://t.co/WB39x4GP99
  • Poll - Does your personality match your #tradingstyle? Vote and find out from @WVenketas here: https://t.co/vREsUIWSJd https://t.co/Ft0ExAmMpq
  • #Dow Jones hits record high, however, central bank liquidity prompts volatility implosion. #FTSE 100 among underperformers with focus remaining on politics. Get your #equities market update from @JMcQueenFX here: https://t.co/EOFleGSeBp https://t.co/ecAyfSUeAM
  • RT @C_Barraud: 🇪🇺 #ECB’s Muller Says More Assets Could Join Stimulus List in Slump - Bloomberg https://t.co/roGEgu0VTQ
  • With increasing volatility in weather patterns, how might storms, hurricanes and floods rattle the supply chain for petroleum-based products and impact crude oil prices? Find out from @JStanleyFX here:https://t.co/O4dgBl47fq https://t.co/OQYqZAYt9S
  • Currency Strategist,@PaulRobinsonFX is a Swing trader. What is your #tradingstyle? Take the quiz and let us know: https://t.co/LPBOcS0Vtd https://t.co/WzRYeqRhUL
British Pound To Threaten 2011 Trend Should Rate Expectations Falter

British Pound To Threaten 2011 Trend Should Rate Expectations Falter

2011-05-06 22:44:00
David Song, Currency Strategist
Share:

The British Pound £

GBP/USD NY Spot Close 1.6707

British_Pound_To_Threaten_2011_Trend_Should_Rate_Expectations_Falter_body_gbpusd.png, British Pound To Threaten 2011 Trend Should Rate Expectations Falter

British Pound To Threaten 2011 Trend Should Rate Expectations Falter

Fundamental Forecast for British Pound: Neutral

The British Pound struggled to maintain the rebound from the May low (1.6353) on Friday, and the sterling is certainly at risk of facing additional selling pressures in the following week as currency traders turn their attention to the Bank of England’s quarterly inflation report, which is likely to highlight the dovish tone held by the majority of the Monetary Policy Committee. As the MPC holds the benchmark interest rate at 0.50% while maintain its asset purchase target at GBP 200B this month, we are likely to see the committee continue to carry out its current policy heading into the second-half of the year.

With the inflation report due out ahead of the BoE minutes on May 18, Governor Mervyn King may talk down speculation for higher borrowing costs during the press conference as the economic recovery in the U.K. cools. As the recent batch of economic developments from the isle-nation confirms a slower pace of growth in manufacturing and service-based activity, we should see the central bank continue to point out the ongoing weakness within the private sector. At the same time, Mr. King may explicitly show an increased willingness to preserve the unprecedented expansion in monetary policy for most of 2011 as he expects the substantial margin of slack within the real economy to bear down on price growth. However, as Standard and Poor’s expects to see heightening price pressures in the U.K. and project a BoE rate hike in the next three-months, the central bank may soften its dovish outlook for monetary policy. An upward revision in the inflation forecast should help the GBP/USD to regain its footing, and the exchange rate may consolidate over the near-term as investors weigh the prospects for future policy.

Nevertheless, the central bank may curb its outlook for growth and inflation in order to defend its wait-and-see approach, and the GBP/USD may continue to retrace the advance carried over from the previous month as interest rate expectations falter. According to Credit Suisse overnight index swaps investors now see borrowing costs in the U.K. increasingly by 25bp over the next 12-monts amid projections for 50bp worth of rate hikes in April, and the GBP/USD may threaten the upward trend from earlier this year should the BoE adopt a highly dovish tone in its quarterly inflation report. As a result, the near-term correction in the GBP/USD may gather pace over the following week, and the exchange rate may test the 23.6% Fibonacci retracement from the 2009 low to high around 1.6200-20 should price action fall back below the 50-day moving average at 1.6284. - DS

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.