- The EUR/GBP quotes in a firmer tone around 0.8390 in the early hours of the European session on Thursday.
- The unemployment rate of the United Kingdom remained stable at 4.4% in the three months until January; The change in the number of applicants was 44.2K in February.
- The BOE is expected to keep interest rates 4.5% on Thursday.
- The German Parliament approves the historical increase in Merz’s expenditure.
The EUR/GBP crossing is maintained in positive land about 0.8390 during the first hours of European negotiation on Thursday. The sterling pound (GBP) weakens in front of the euro (EUR) after the United Kingdom employment report. The attention will focus on the decision on the interest rate of the Bank of England (BOE), without changes in the expected rate.
The data published by the United Kingdom National Statistics Office on Thursday showed that the country’s ILO unemployment rate rose 4.4% in the three months to January. This figure was in line with the expectations of 4.4% during the informed period. Meanwhile, the change in the number of applicants increased by 44.2K in February compared to 2.8K above, below the estimated 7.9K figure. The GBP remains weak in an immediate reaction to the United Kingdom Employment Report.
The BOE is expected to maintain interest rates without changes on Thursday and adhere to its mantra of gradual movements in the middle of the high economic uncertainty. The markets anticipate that the Central Bank of the United Kingdom will maintain its reference interest rate by 4.5%, with the next cut in May, followed by more reductions in August and November, according to most economists surveyed by Reuters last week.
In the front of the euro, the German Parliament approved plans for a massive increase in spending on Tuesday. This positive development could provide some support to the shared currency, since the plan would provide the chancellor waiting for an unexpected income of hundreds of billions of euros to boost the investment after two years of contraction in the largest economy in Europe.
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 commercial 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.
