For a long time the British Pound remained in the shadow amid global problems and stronger Euro. Investors were looking forward to the Bank of England’s decision. Later the British Pound appreciated. It seems like GBPUSD is about to continue its rally.
What makes investors buy the British Pound?
According to Eugene Olkhovsky, ’s expert from Canada, there are several factors contributing to the strength of the British Pound:
Firstly, the reforms recently conducted by the Bank of England may strengthen the British currency in the global currency market.
Secondly, almost all the indicators of the British economy have shown some growth so far.
The UK’s industrial production has grown from -1.1% m/m in Oct 2011 up to +0.5% m/m in Dec 2011, thus outpacing the forecast.
According to the chart above, ’s indicator (the blue curve) doesn’t indicate enough strength – it is still in the “red” zone. It means that the UK economy is not strong enough to support the national currency in mid-term perspective. However, a short-term reversal (rally) definitely has a positive impact on the British Pound.
GBPUSD completed the wave A/B M40 after breaking the MF pivot at 1.5836 and forming a FZR.
Industrial production: Will it help the British Pound?
Manufacturing industry is not a key one for the UK GDP. However, it can help to anticipate the dynamics of interest rates. Therefore, any growth contributes to the appreciation of the British Pound.
Taking into account the possibility of strengthening the monetary policy by the Bank of England, the British Pound should remain stable, with a chance of strengthening further.
