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The British Pound in Need of Support

By:
Dmitriy Gurkovskiy
Updated: May 14, 2018, 12:27 UTC

The pound sterling is around its January lows as we are heading into the third week of May. The decision of the Bank of England to leave the interest rates and the overall monetary policy unchanged disappointed the market.

gbp

Investors came to a conclusion that the regulator would be wary regarding the interest rates moving forward.

One of the issues behind that is the slow growth rate of the UK economy early this year. Both the analysts and the BoE board members are, however, sure that this slowdown is a local one and is unlikely to continue.

In its meeting minutes, the UK central bank says that tightening its monetary policy will be in place in case the economy moves in line with the consensus overall. Sonders and McCafferty, both members of the BoE Board, are all for raising the rates to 0.75%, while others are happy with the current situation.

Meanwhile, the BoE consensus regarding the GDP growth dropped from 1.8% to 1.4%, which also acts as a bearish signal for the GBP traders.

As for the long-term outlook, it remained unchanged, as the Bank of England is still looking to raise the rates three times within the following three years. However, with the economy being week in Q1, the BoE may well change the interest rates later on, not in mid-2018 as planned before. This is, of course, another negative factor for the GBP.

Technically, GBP/USD is still trading within a descending channel, with the support being at 1.3459, the last week and four months low. The bears have got a chance to push the UK currency even lower as long as it fails to come above 1.3600 or 1.3650.fun.

This article was written by Dmitriy Gurkovskiy, a Chief Analyst at RoboForex

About the Author

Dmitriy has Masters Degree in Finance from London School of Economics and Political Science, and a Masters Degree in Social Psychology from National Technical University of Ukraine. After receiving postgraduate degree he began working as the Head of Laboratory of Technical and Fundamental Analysis of Financial Markets at the International Institute of Applied Systems Analysis. The experience and skills he gained helped him to realize his potential as an analyst-trader and a portfolio manager in an investment company.

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