The pound fell against the US dollar driven down by announcements by policy maker Adam Posen, who has called for adding to stimulus since October, as he criticized the Bank for International Settlements when it said central banks should tighten monetary policy to curb inflation as he sees that the impact of oil is not as before, revealing that the British economy is at “little risk of inflation, let alone stagflation.”
The latest announcements by BoE policy makers showed their defense to the bank’s lose monetary policy which increased expectations the BoE would not raise interest rate till late this year, therefore sapping demand on it.
Moreover, the pound continued its decline after data showing thatannual first quarter GDP was revised down to 1.6% compared with both preliminary and expected readings of 1.8%.
On the other hand, S&P Caseshiller home price dropped 3.96% in April from the prior 3.77 fall in March, while consumer confidence slipped to 58.5 in June from 61.7 in May. The grim reports lowered the dollar’s gains.
Wednesday July 28
At 08:30 GMT, UK will release mortgage approvals and M4 money supply which are expected to have lower effect on the pound’s movements. At 11:00 GMT then 14:00 GMT, the U.S economy is to release MBA mortgage applications for the week ended June 24 and pending home sales for May, where expectations are in favor of 1.0% drop from the prior -11.6% fall.
Little attention would be given to UK data where data from the US will be under focus to monitor the status of the housing sector, which triggered the 2008 financial crisis, where the recent data has been showing weakness.
The outlook remains to the downside as the dollar may benefit from the end of the QE2 this month as its supply will be reduced, while the pound, which is taking several cues from the weak data on the one hand and announcements by BoE officials on the other, is expected to decline further.
Written by ForexMansion.com