British Pound Volatile Ahead of BoE Quaterly Inflation Report

TEP – 9 February 2010  

The British Pound tumbled lower for the fourth-day, with the exchange rate trading at 1.5583 and GBP/SGD 2,2107, and likely to see the GBP/USD face increased volatility throughout the week as the Bank of England is scheduled to release its quarterly inflation report on Wednesday at 10:30 GMT.  

However, as the daily RSI, which currently stands at 25, continues to push deeper into oversold territory, the market may see a corrective retracement this week as price action holds above the psychological support at 1.5500.

The BoE is expected to update its economic forecast this month and may hold a hawkish outlook for future policy as price pressures rise at a record-pace, but may see the central bank discount the shift in near-term inflation as Governor Mervyn King forecasts price growth to fall back below the 2% target towards the end of 2010.