Mixed Views on Pound’s Performance This Week

The Great Britain pound was rallying recently following weakness in the first half of March. Is the rally sustainable or it is just a pause before a drop to new lows? Analysts have mixed view on this matter.
There are factors that are supportive for the sterling. First of all, the neutral monetary stance, demonstrated by the Bank of England last week, showed yet again that policy makers are reluctant to expand already massive quantitative easing program. It is likely that the bank will continue to keep the policy neutral in the future and it is positive for the pound. Problems in Europe support the pound’s role of a safe haven. Last week’s fundamental reports were not bad and this week may produce more positive data for the UK currency. Manufacturing production is expected to show growth by 0.4 percent after dropping as much as 1.5 percent in January.
Not everything is good for the sterling though. Britain’s economy still looks fragile despite the recent signs of recovery. The trade balance deficit is expected to widen after shrinking for three consecutive months. The safe haven role of the currency diminished after the crisis in Cyprus was averted. Such factors caused losses for the sterling today and may continue to affect the currency for the rest of the week.
Mixed fundamentals resulted in contradicting forecasts from experts. DailyFX is bullish on GBP, while Forex Crunch is bearish. CurrencyNews.co.uk described its stance as â€œneutral to negative”. Of course, the UK currency will likely to extend its rally versus JPY as Bank of Japan’s aggressive monetary easing greatly weakened the Japanese currency.

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