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15 Apr 2013
Forex Flash: GBP/USD looks bullish ahead - BTMU
FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts note that the pound is continuing to extend its recent rebound against USD in the near term and see spot moving within a range of 1.5200 and 1.5600.
They see that spot has retraced 38.2% of its sharp decline during early 2013 and they believe that the scope for a further short squeeze higher is now becoming more limited. They feel that the pound is benefiting from an improving trend in UK economic data in early Q2 with real GDP also likely to have narrowly avoided a second consecutive contraction in Q1. However they add that the underlying pace of growth remains weak in the UK and the BoE appears to be shifting towards adopting a more activist monetary easing stance to generate a stronger economic recovery which leaves the pound still vulnerable to the downside. They write, “BoE has clearly signaled that it is willing to tolerate an inflation overshoot for longer which was reinforced by the change to it's monetary policy remit. The annual rate of headline inflation is expected to rise further above target in March. The release of the latest BoE minutes are expected to reveal that the MPC remains close to expanding QE further should the pace of growth disappoint again. MPC concern over the pound's sharp fall early in 2013 will also likely have eased.”
They see that spot has retraced 38.2% of its sharp decline during early 2013 and they believe that the scope for a further short squeeze higher is now becoming more limited. They feel that the pound is benefiting from an improving trend in UK economic data in early Q2 with real GDP also likely to have narrowly avoided a second consecutive contraction in Q1. However they add that the underlying pace of growth remains weak in the UK and the BoE appears to be shifting towards adopting a more activist monetary easing stance to generate a stronger economic recovery which leaves the pound still vulnerable to the downside. They write, “BoE has clearly signaled that it is willing to tolerate an inflation overshoot for longer which was reinforced by the change to it's monetary policy remit. The annual rate of headline inflation is expected to rise further above target in March. The release of the latest BoE minutes are expected to reveal that the MPC remains close to expanding QE further should the pace of growth disappoint again. MPC concern over the pound's sharp fall early in 2013 will also likely have eased.”