The pound needs support the British economy

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The British pound sterling by the third week of may remains near the January low. After the Bank of England kept reserved against the potential of rising interest rates and has left all its monetary policy unchanged, the market “fell the spirit”. Investors felt that in the future the regulator will be as well cautious in terms of interest rate revision.
One of the problems, in fact, remains weak growth of the British economy at the beginning of the current year. However, the economists and the Bank of England members believe that the downturn is local, transitory, and therefore unlikely to be continued in the future.
In an accompanying statement, the Central Bank at the end of the may meeting stated that the tightening of monetary policy will be appropriate if the overall economy will develop in accordance with the General predictions. Two monetary policy from among the members of the Committee (this is Saunders and McCafferty) believe that the rate should be raised to 0.75% per annum. The remaining seven are quite satisfied with the current situation.
Against the pound continues to play the deterioration of forecasts of the Bank of England’s overall GDP by 2018. The regulator has reduced expectations to 1.4% vs previous estimate of 1.8%.
Meanwhile, the BoE is not changing its long-term perspective: as previously mentioned, the Central Bank wants to understand the rate of 3% for 3 years. However, observed in January-March, the relative weakness of the economy and its separate areas can lead to the fact that the rate will be reviewed not in the middle of 2018, and much later. It is clear that for the pound is pronounced negative.
The GBP/USD pair remains within the descending trading channel. Key support in this case is mark 1,3459, it – low last week and the last four months. As long as the pair fixates above the levels of 1,3600-1,3650, the seller still has a chance to update the minimum values.
Dmitry Gurkovsky,
Senior analyst,