Alex Bobrov
Today, on June 26th, the British Pound is up by 0,26% against its American counterpart. The rally took place after Mark Carney, Governor of the Bank of England, hold a speech in London. Mr. Carney named the risks that appeared in the UK housing market as the biggest risks for the British economic growth. He also announced the introduction of limitations imposed on risky mortgage loans in order to prevent higher amount of bad loans.
According to Market Leader, the Bank of England toughened the mortgage lending rules. The introduction of those rules signals higher concerns in terms of potential threats from the British economy, which is still trying to recover from the global crisis.
The MPC, which guarantees the stability of the UK financial system, has ordered he lenders to narrow the aggregate amount of money allocated for lending down to 15% of the banks' balance sheet. At the same time, the loan cannot only be 4,5 as big as the borrowers, income at most. The banks were also recommended to conduct more comprehensive tests in order to check the borrower's solvency with a glance at a possible interest rate hike.
At the same time, the UK housing market saw a 9,9% y/y price increase in April, the Office for National Statistics reports. The government and the BoE are afraid that higher interest rates when coupled with lower housing prices may well make borrowers insolvent, which int its turn may result in an economic slowdown.
The current conditions imposed by the BoE are designed to cool down the housing prices and to focus on the resolution of the key issue – preventing the inflation of a potential and dangerous price bubble and freeze housing prices without slowing down the economy.
GBPUSD
According to Masterforex-V Academy, the near-term prospects looks as follows:
The H1 chart of GBPUSD indicates a bullish momentum from 1,6923 up to the intraday high of 1,7062 followed by a bearish reaction down to 1,6950. This is the starting point from another bullish move, probably a momentum.
If there is a rebound from 1,7005 followed by a move down to 1,6970, we are likely to see a further decline down to 1,6950. If this is the case, we are likely to see the end of the entire rally from 1,7039. The mid-term prospects of the rally may be questioned in this case.
Alternatively, if the price consolidates above 1,7005 and rebounds from it, this may give way to a move up to 1,7039 and above. If the price breaks the level, the next targets to watch are 1,7048 and 1, 7062.
At the same time, the Department of Binary Option Trading of Masterforex-V Academy recommends going long (buying call options) when the price has retraced back to the nearest level of support. The lifetime of the option is 1 hour.
Alex Bobrov
