- The high unemployment figures in the United Kingdom and low salary growth are weighing on the pound.
- The euro is receiving support from optimistic data from the eurozone and hard line comments of the ECB.
- The pair is testing the neck line of an inverted H&S, at 0.8460.
The Euro (EUR) is rising in front of a weaker sterling (GBP) on Tuesday, with the bulls pressing against the upper part of the negotiation range last month, at 0.8460, favored by the weak employment figures of the United Kingdom and the positive data of the Eurozone.
The data of the United Kingdom published earlier on Tuesday revealed that the unemployment rate increased to 4.6% in May, its highest level in four years, with the applicants for unemployment benefits increasing by 33.1k in May, more than three times the increase of 9.5K planned by market analysts.
In addition, salary growth slowed 5.2%, from the growth of 5.5% registered in April, below the reading of 5.4% anticipated by the market consensus. These figures are paid the way for the Bank of England to even more loosen monetary policy, and have pushed the GBP down in general.
The Eurozone data, on the other hand, have exceeded expectations with the confidence of investors reaching maximums of one year and Italian industrial production growing well above the forecasts. Apart from that, the Hard and Villeroy of the ECB lines have provided additional support to the euro.
Technical Analysis: EUR/GBP Testing the neckline of an Alcista H&S
From a technical point of view, the torque is about to test a previous support, now converted into resistance, and the neck line of a head and shoulder pattern invested, at the level of 0.8450-0.8460.
The measured objective of the H&S pattern is in the 0.8540 area, which coincides with the maximums of April 25 and 30, and May 2. Above here, the following objective is the maximum of April 21, at 0.8620.
In the lower part, a bearish reaction below 0.8360 cancels this vision and increases the pressure towards 0.8325 (minimum of April 3) and the minimum key of the year until the date of 0.8245.
EUR/GBP 4 -hour graphic
LIBRA ESTERLINA FAQS
The sterling pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most commercialized currency exchange unit (FX) in the world, representing 12% of all transactions, with an average of $ 630 billion a day, according to data from 2022. Its key commercial peers are GBP/USD, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The sterling pound is issued by the Bank of England (BOE).
The most important factor that influences the value of sterling pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions itself has achieved its main objective of “price stability”: a constant inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the Bank of England will try to control it by raising interest rates, which makes access to credit for people and companies more expensive. This is generally positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for global investors to invest their money. When inflation falls too much it is a sign that economic growth is slowing down. In this scenario, the Bank of England will consider lowering interest rates to reduce credit, so that companies will borrow more to invest in projects that generate growth.
Published data measure the health of the economy and can affect the value of sterling pound. Indicators such as GDP, manufacturing and services PMI and employment can influence the direction of the sterling pound.
Another important fact that is published and affects the pound sterling is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will benefit exclusively from the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
