The FOMC minutes of itsmeeting on last 30th Jan came to show worries about the Fed’s QEoutlook as what have been shown in the recent report.
The FOMC’s members have givenideas but most of them were towards decreasing of the current QE plans notincreasing them putting pressure on the current market sentiment causing losesin the equities markets and pushing the USD up on the risk aversion and onincreasing of the closer than later expectations of ending or pausing the QEpumping liquidity of it.
The greenback has found iteasy to rise across the broad after these minutes and specially versus theBritish pound which has been hit today again by the release of the MPC recentmeeting minutes on 7th of this month which have shown more followersto David miles who has voted on 10th of last Jan alone in favor ofincreasing BOE’s assets purchasing plan by another Stg25B to be Stg400B but themajority came again by keeping it unchanged despite Marvin King adoption ofMiles’s view beside Fisher Against the other six members.
As the majority hasappreciated rising of the inflation upside risks as what has been seen in therecent inflation quarterly report represented a week ago by King who told themarkets to be prepared for watching yearly inflation rate above BOE target at2% for the coming 2 years after UK Jan CPI came at 2.7% y/y as it was itDecember and also after CBI has lowered its forecast of this year GDP to be upby only 1% from 1.4% in last November forecast of it in appreciation of thecurrent uncertainty about the global growth and it has referred to an availablespace in front of the British Gov to spur growth by financial stimulation.
And it looks right, as if youare to read between the recent data which have come out from UK, you can findeasily Shrunk economy in 2012 Q4 by 0.3% q/q, weak manufacturing performance aswhat has been seen with UK Manufacturing PMI reading of Jan getting back againto 50.8 after rising for the first time in December to 51.2 in the expansionterritory above 50 since last April, weak consuming spending as what has beenseen with UK retail sales which slumped by 0.6% yearly and monthly in Jan, Higherunemployment rate as what has been represented yesterday by rising of ILOUnemployment rate to 7.8% again and that’s why King has seen that there can bespace for another stimulation step with these current growth downside riskcausing the current slowing down pace and it is less probable to cause risinginflation threat.
So, you can easily see thestagflation risks rising again in UK after calming down in 2012 after it hadcooled BOE role in 2011 when the stagflation was capping the MPC members fromstimulation the economy fearing of the inflation rising further while it wasall over 2011 above 4% reaching 4.8% in September 2011 before easing back again.
As the yearly inflation rate have come under pressurein UK in 2012 giving distance to BOE to increase its Assets purchasing planafter diminishing the impact of the standard rate of VAT increasing forunderpinning the governmental resources to 20% from 17.5% on 4th January 2011which has contributed in raising the inflation by about 0.75% yearly over allthe months of 2011 and it is still on with no cut can make a difference likewhat CBI has tried to refer to by mention the governmental role, while the monetaryrole can be capped as yearly inflation target of BOE which it works for is only2%.
And now again,we see BOE near this same stance again ahead of new coming president in June whowill face rising prices and staged economy actually metalized on the wageswhich came down in UK to the lowest since 2003 to be at 11.21 pound per hourshowing lower prosperity by the pressure of stagflation of the British citizen coolinghis confidence in spending.
God willing, GBPUSD can meetnow in the case of falling further after falling yesterday below 1.5392 and1.5267 whereas it has formed its recent bottom on 27th of last Maymeeting supporting level at 1.5123 before the psychological level at 1.50 whichcan be followed by 1.4947 while rising back from here can be met by resistinglevels have been formed at the tops which has came in its way of falling downat 1.5316, 1.545, 1.5548, 1.5688, 1.5843, 1.5893 before the psychological levelat 1.60