IC Markets

Pound Turns Weak after FY17 GDP Growth View Slashed by BoE

Pound Turns Weak after FY17 GDP Growth View Slashed by BoE

Great Britain Pound British MoneyThe UK Pounds was able to forge greater heights against other G10 currencies after the positive sentiment created due to snap elections announcement. On the other hand, Australian Dollar remained weak because of weak employment data and retail sales.

The currency pair GBP/AUD has been pushed to a high of 1.7640 after the economic data and political developments. However, it is likely that the currency pair would begin a downtrend shortly that might last several weeks. It was affirmed in a meeting conducted by Bank of England on the monetary policy and Australian budget that was presented last week.

The minutes of Bank of England’s policy meeting that was released last Thursday showed lower than expected anticipated economic expansion in the year 2017. The central bank now predicts the GDP growth rate of United Kingdom to be only 1.9 percent against the forecasted 2%. The inflation outlook for this current year was raised to 2.8%. It is to be noted that the bank also expects the real income to dip low in this year.

Al Jazeera English

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According to the minutes of the meeting, it was found that only one member has voted in favour of a rise in interest rate. The market expected to vote for at least two people in support of hike in interest rate.

The chief economist at CBI, Rain Newton-Smith, has said that Bank of England would not make any changes in the monetary policy because the existing mixed economic data shows the pressure on household spending and weak wage growth.

The traders are cautioned by the European investment and financial services institution that Sterling looks to be at a higher price as compared to Eurodollar.

The Chief Economist at Intesa Sanpaolo, Luca Mezzomo, commented that Pounds is likely to weaken in the coming days because of rising tension between UK and EU regarding Brexit negotiations.

On the other hand, the Australian dollar is gaining strength because of a favourable Federal budget. Levy on banks for fund welfare programs, the rise in capital gain tax discounts up to 60% for affordable housing investments and infrastructure spending package are in favour of Australian currency. Hence for the coming days, it is likely that the currency pair GBP/AUD would dip low.

Several factors point towards the decline of this currency pair. First of all, the support level is broken at 1.7530, and secondly, there is a bearish makeover of the MACD below zero line. And finally, the stochastic oscillator indicates a lack of momentum because of being in a bearish zone.

GBPAUD Pair May 15th 2017

GBPAUD Pair May 15th, 2017

To make profits from the declining GBP/AUD currency pair, you need to create a short position near 1.7440, and it can be covered near 1.7180 where the next primary support exists. You should also place a stop order above 1.7560 to control the losses.

You need to buy a PUT option if you want to earn money from this predicted decline as a Forex trader. The Option should have a trade expiry of one week, and it should be acquired when the currency is trading near 1.7440.

Ed Lamadrid

Ed Lamadrid

I'm Ed Lamadrid, a CPA, blogger and a forex trader. Welcome to Top10FX.net. Follow my website for the most trustworthy forex broker reviews and last minute financial trading news.


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