GBP/USD Daily Forecast

Tuesday, Feb 23 2016

Focus of yesterday's session was on Inflation Report Hearings. The Bank of England could cut interest rates to zero, but will seek to avoid following Sweden, Denmark and the eurozone by setting negative rates to bolster growth and inflation. Mark Carney, the Bank’s governor, said Threadneedle Street had “no intention and no interest” in implementing negative interest rates and would adopt the full range of the Bank’s other powers to deal with a downturn in the economy.

He said: “If we were in a position where the economy needed additional stimulus ... we could cut interest rates towards zero. We could engage in additional asset purchases, including a variety of assets. “We could also provide a perspective where we could adjust our policy horizon – in other words we could shorten our policy horizon over which we wanted to return inflation to target.” Carney, who was responding to questions from MPs on the Treasury select committee, said the world economy had entered a period of low growth and low interest rates and was likely to be prone to financial shocks.

In the US session CB Consumer Confidence and Existing Home Sales figures were released. The Conference Board Consumer Confidence Index, which had increased moderately in January, declined in February. The Index now stands at 92.2, down from 97.8 in January. Analysts were anticipating decrease to 97.0. The Present Situation Index declined from 116.6 to 112.1, while the Expectations Index decreased from 85.3 to 78.9 in February. “Consumer confidence decreased in February, after posting a modest gain in January,” said Lynn Franco, Director of Economic Indicators at The Conference Board.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, inched 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Sales are now 11.0 percent higher than a year ago – the largest year-over-year gain since July 2013 (16.3 percent).

Tomorrow, from the UK, BBA Mortgage Approvals data will be published. Increase to 45,200 is forecasted. In the US session New Home Sales figures will be released. Analysts predict decline to 522,000.

Figures to watch:

BBA Mortgage Approvals (Wednesday 10:30)

New Home Sales (Wednesday 16:00)

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