PMI in the British manufacturing sector was 48.2 in July against the forecast of 49.1 and 49.1 in June. After the publication of the index at 10:30 (GMT+2), the GBP is declining in the Forex market and in the pair GBP/USD. Market participants are waiting for the monetary policy decisions by the Bank of England, which will be known on Thursday (13:00 GMT+2), and data on the US labor market for July, including Non-Farm PayRolls and as unemployment rate.

Significant current account deficit and expectations of slowing down in economic growth in the UK associated with Brexit have increased possibility of lowering interest rates in the UK at the meeting of the Bank of England on Thursday. At the previous meeting, the rate has not been lowered, despite expectations and statement by the head of the Bank of England, Mr. Mark Carney that a rate would be lowered this summer. Now, the probability of a rate reduction on Thursday is very high. If the rate is reduced, the Pound will go down.

It is also expected that the volume of asset purchases will be increased by the Bank of England by 100 billion pounds, up to 475 billion pounds, as part of the QE.

In mid-July, representative of the Bank of England Mr. Andy Haldane said about the necessity of more monetary policy easing in the UK. Uncertainty of future prospects In the UK economy after Brexit puts strong pressure on the GBP.

Unexpected decision adopted by the Bank of England at the meeting in July to keep interest rates in UK at 0.5% has surprised market participants. In the following up comments the Bank of England said that most of the Committee members expect policy easing in August.

Thus, expectations of monetary policy in easing in the UK are high. Otherwise, the pound will sharply strengthen in the market and the pair GBP/USD can go up.

GBP/USD: High probability of the monetary policy easing in the UK.  Fundamental analysis for 01.08.2016

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