The British economy continues to give signs of recovery. On the upbeat forecasts of the NIESR and the reduction of the trade deficit, analysts of Crédit Agricole intend to buy the British currency before the release of the report on inflation from the Bank of England.
According to the report of the NIESR, the growth of the British economy during the period from November to January was 0.8%, which exceeded the figure for October-December (0.7%). The authors also reported that, according to their forecasts, the GDP of the UK will reach pre-crisis levels during nine months. However, as they suppose, even under the most optimistic forecast the gap between potential GDP and real GDP will remain essential. In the NIESR they expect that the current British GDP will grow by 2.5% and in 2015 - by 2.1%. However, - they say - the Bank of England will start to raise rates not earlier than the second quarter of 2015.
Ratings of NIESR are corresponded with data on industrial production, which, according to the OSN, has grown in the IV quarter for 0.5%. Despite the fact that the growth rate was lower than expected (0.7%), economists believe that this discrepancy is not enough to revise growth forecasts that were made earlier. Low production was balanced by the export growth, thus of the deficit of foreign trade in December reduced to its lowest level for the previous year. Reduction of the deficit to 7.7 billion pounds contributes the rise of oil exports. Also is pointed the reduction in the trade deficit with the EU countries, which fell to its lowest level since 2005.
The next important news will be the Inflation Report in Great Britain that will be published in the current week. As expected in the Crédit Agricole, the report will show the growth of downstream risks of inflation, and this will be one of the arguments in favor of keeping interest rates at the current, minimum, despite optimistic data that was received from the labor market. According to Manuel Oliveira, further improvement in the labor market will keep inflation expectations stable, and it is unlikely that the British currency would experience a significant downward pressure. The bank plans to buy the GBP/USD and the GBP/CHF on the decline.
Meanwhile, the pound sterling rate continues to remain in a bullish long-term trend. The GBP/USD pair is forming a rising wave, prospective A/B, estimate at least H6. Breaking the minimum 1.6251, the pair will begin a long-term downtrend. The nearest supports are the Fibonacci levels of 1.6229, 1.6153, 1.6092, 1.5994, and 1.5959. Breakthrough of the high at 1.6667 will show continuation of the long-term uptrend. The key resistance will be the long-term high of 1.6746.
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