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    GBP/USD: prospective of the British Pound by the end of 2017 on 09.02.2016

    Last week, the Bank of England left interest rate at the level of 0.5%. The rate has been at this level since March 2009. Although some of the British economists supposed that the interest rate could be raised, current situation in the world finance markets are against this prospective.

    At the end of last month the head of the Bank of England Mark Carney said that there was no ground for raising interest rate in the country.

    Although the data on business activity index in the UK service sector, (PMI), was positive and better than expected (55.6 in January against the forecast of 55.3 and the value of 55.5 in December), it was not sufficient to consider that the British economic growth is strong enough to tighten monetary policy in the country.

    Moreover, in the quarterly report the Bank of England has reduced growth forecast of the British economy for 2016 and 2017 (to 2.2% and 2.4% respectively).

    It is feasible to expect to increase in the interest rate and stable growth of the Pound not earlier than mid – 2017, provided that inflation rate will slightly increase the target level of 2%, as expected by the Bank of England.

    At the same time, inflation rate depends on the acceleration of economic growth, the rise in price of commodities and the level of wages in the country.

    Meanwhile, the situation in the commodity market and the global economy is not changing to the worse.

    Note that Ian McCafferly, the only supporter of the increase in the interest rate in the UK in the past five month, has changed his opinion and does not propose the rise in the interest rate from 0.5% any more.

    Persisting concerns about the results of referendum on the UK membership in EU, which will be held this summer, have negative impact on London stock exchange FTSE100 and the price of the Pound.

    No matter what decision the US Fed will adopt about interest rate in March, the pair GBP/USD will remain under pressure in the medium-term.


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