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Currency Analyst since 2010

GBP/USD: forecast for December 14-20

By Elizabeth Belugina

British pound had another volatile week. Cable fell as British manufacturing production declined more than expected. Then GBP/USD formed a higher low in the 1.4955 area and then recovered to 1.5200.

The Bank of England left policy unchanged underlining that inflation in the UK is low because of the fall in oil prices. 8 policymakers voted to keep the benchmark rate unchanged at 0.5%. According to its forecast, headline inflation will remain below 1.0% during the first half of 2016. Oil prices decline is negative for the pound.

Next week pay attention to British consumer inflation figures on Tuesday, labor market figures on Wednesday and retail sales on Thursday.

Technically support in 1.5000/1.4950 area once again proved to be strong: the price quickly bounced from these levels. There’s some space for increase to 1.5300 area, but to gain beyond that pound needs brighter economic figures and recovery in oil. We expect high volatility to persist and the bears to keep trying to pull British pound lower. 

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