Currency Traders are keeping their calm amidst the confusing signals being given by the BOE dissenters. Through it all, volatility in the pound rose the least among the Group of 10 currencies in the past month, while sterling has fallen for seven straight weeks. That shows traders see little chance of a change in policy anytime soon with parts of the economy falling short of forecasts. Last month, GBP/USD jumped up 200 pips when BOE Governor said in a speech that interest rate increase might come sooner than later. The very next day during the question hour session at House of Commons, he changed his statement and said interest rate increase will be data driven. GBP/USD fell and a downtrend started. Market analysts don’t see any interest rate change in the future that is making GBP/USD is bearish for the the last month. GBP/USD has fallen more than 700 pips now. Has the downtrend on GBP/USD come to an end?
“Sterling needs to weaken,” James Shugg, a senior economist at Westpac Banking Corp. in London, said yesterday by phone. The lender was the most-accurate forecaster for the pound versus the euro in the second quarter, according to data compiled by Bloomberg. “Perhaps Carney provided a bit too much market commentary.” This Morgan Stanley analyst thinks that BOE will increase the interest rates in February.