Although US data on NFPR for April was below the forecast (+160 000 new jobs against the forecast of 200 000 and the rise of 208 000 in March), the USD strengthened against the major currencies on Friday. Unemployment rate in the USA remained at the previous level of 5.0%. By the end of the trading day last Friday the pair GBP/USD fell by 50 points. exceed the target level of 2%.
On Thursday at 13:00 (GMT+2) interest rate decisions of the Bank of England will become known. It is expected that the interest rate will remain at the previous level of 0.5%. However, the following up comments may affect movement direction of the Pound in the financial market. Statistics shows that there is slowdown in economic growth in the UK. Industrial production fell by 1.9% on annual basis in March. Production in the manufacturing sector fell by 1.9% on annual basis in March. Consumer confidence index fell to the negative value of -3 in April, which is the lowest level since the end of 2014. exceed the target level of 2%.
Earlier in April Bank of England president Mark Carney said that if British people vote for the exit from the EU, the Pound may lose 20% of its value. Uncertainty related with the referendum on the UK’s membership in the EU and weak macro-economic statistics (in particular low GDP in the last year’s two quarters was +0.5% and +1.9% annually; and the rise by 0.4% in Q1 of the same year will prevent the Bank of England from tightening monetary policy in the few next months. exceed the target level of 2%.
In the last inflation report the Bank of England lowered economic growth forecast for 2016 and 2017 to 2.2% and 2.4% respectively. It is expected that the interest rate will be raised not earlier than the middle of 2017, (which will also involves the rise in price of the Pound) provided that inflation rate by that time will exceed the target level of 2%.
The pair GBP/USD will remain under pressure in the medium-term. Breakout of support level of 1.4335 may trigger further decline in the pair.