Comment: Trading in the foreign exchange market is usually a tough business. Being aware of where exchange rate may go in future appears to be straightforward but eludes a large number of traders. The reason for that is they will generally fail to keep in mind every piece of information that’s available. Simply understanding signals and charts merely gives half the situatiom. To obtain an advantage on the forex market facts are king and knowing where to locate it is actually crucial. We look to give you the most important reports that will help you make better investing selections. This post, Pound Sterling Today: GBP Weak But Correction Was Predicted gives you the latest information about exactly where the experts feel exchange rate should go providing you with an opportunity to be a little more profitable in your forex trading
A poor week for the British Pound culminated in some heavy selling pressure as GBP/USD tumbled to 1.38 from highs above 1.40. Disappointments were also seen for the Pound against the Euro, where yet again EUR/GBP threatened to make meaningful progress lower before bouncing strongly and once again testing the 100 and 200-day moving averages in the high 0.88s. A very disappointing group of trade data from the UK was an additional concern for the Pound, as Industrial Production, Manufacturing Production and the Trade Balance all missed forecasts. Indeed, the total Trade balance was actually almost double what was expected (over £2 billion more at -£4.8 Billion) and is a growing source of concern for a country whose weaker currency has so far failed to translate into a meaningfully better export market.
BoE boosts Pound but only temporarily
The Bank of England gave the GBP a boost last week with an upbeat and more hawkish policy statement than expected by markets. However, investors seemed sceptical that the UK central bank would be able to deliver on this message, in part because they based the growth upgrades on some rather optimistic government figures for a smooth Brexit, something that looked increasingly unlikely last week. Forex analysts at UniCredit released a fairly comprehensive analysis of the Bank of England’s outlook over the weekend, including 5 key points which are all hinting that the UK institution’s more hawkish commentary,
“(1) The MPC minutes included a prominent line that the bank rate would likely need to rise “somewhat earlier and by a somewhat greater degree”; (2) Upward revisions to the BoE’s growth forecasts despite conditioning on a higher yield curve; (3) The MPC judges that there is very little spare capacity and expects excess demand from early 2020; (4) reflecting reduced spare capacity, the MPC has returned to the more conventional two-year (instead of three-year) forecast horizon for returning inflation to target; and (5) Still an inflation overshoot at the two- to three-year horizon”
Despite these factors, UniCredit is sceptical that Governor Carney will actually raise rates this year, as they believe he may be caught out by lagging inflation and so feel less compelled to hike while Brexit rumbles on. There is no question he would prefer not to hike, so if this outcome manifests itself then it could be a very likely disappointment for GBP bulls.