- The EUR/GBP is strengthened about 0.8495 in the first bars of the European session on Thursday, rising 0.27% in the day.
- The United Kingdom’s GDP contracted an intermensual 0.3% in April, weaker than expected.
- The president of the ECB, Lagarde, said that the Central Bank is in a good position regarding interest rates, but hinted at a pause in the fees.
The EUR/GBP cross wins impulse towards 0.8495 during the first bars of the European session on Thursday. The sterling pound (GBP) weakens in front of the euro (EUR) after the publication of the United Kingdom’s growth data. The attention will focus on the speeches of those responsible for policies of the European Central Bank (ECB), who are scheduled to speak later on Thursday.
The data published by the Office of National Statistics (ONS) on Thursday showed that the economy of the United Kingdom contracted an intermencing 0.3% in April, compared to an expansion of 0.2% in March. This figure was worse than the estimation of a 0.1% drop in the reported period.
Meanwhile, monthly industrial production fell 0.6% in April compared to -0.7% previous. This reading was below the market consensus of -0.5%. The GBP attracts some vendors in an immediate reaction to the negative data of the United Kingdom GDP.
The United Kingdom GDP data, weaker than expected, together with the United Kingdom’s employment data, also weak, published earlier this week, they could increase market expectations that the Bank of England (BOE) will cut interest rates more than investors had previously projected. This could exert some sale pressure on the short -term GBP.
In the front of the euro, the hard line comments of the ECB could raise the common currency. The president of the ECB, Christine Lagarde, said after the policy meeting that the Central Bank could be approaching at the end of the flexibility cycle. Lagarde also said during the weekend that the Central Bank’s rates are now in a “good position” despite the high uncertainty caused by Trump’s tariff threats.
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.
