EUR/GBP is strengthened above 0.8650

  • The EUR/GBP operates in a positive note around 0.8655 in the first bars of the European session on Friday.
  • Investors continue to trust that the BOE will cut the rates next month after the unemployment rate reached a maximum of four years.
  • The ECB is expected to wait until December to perform the final cuts of fees.

The EUR/GBP gains land about 0.8655 during the first bars of the European session on Friday. The Pound sterling (GBP) depreciates in front of the euro (EUR) as the unemployment rate of the United Kingdom reaches the highest level in four years. Operators expect the German production price index (IPP) and the current account of the Eurozone, which will be published later on Friday.

The United Kingdom unemployment rate rose to 4.7% in the three months to May compared to the previous 4.5%, the United Kingdom National Statistics Office reported Thursday. This figure was below the expectations of 4.6% during the informed period. Analysts expect the United Kingdom labor market to continue weakening, which makes the perspective of an interest rate cut from the Bank of England (BOE) next month it is even more likely. This, in turn, could exert some sale pressure on the short -term GBP.

Monetary markets are now valuing almost 89% probabilities that the United Kingdom Central Bank reduces indebtedness costs in August, compared to 87% on Wednesday. Analysts expected the BOE to make two reductions in interest rates for the end of the year, which would take the bank rate to 3.75%.

In the front of the euro, it is anticipated that the European Central Bank (ECB) will delay its final cut of interest rates until December without investors concluding, meanwhile, that relief has ended, according to a Bloomberg survey to economists. The president of the ECB, Christine Lagarde, declared that the Central Bank is in a “good place” to navigate any challenge to economic growth and inflation that may arise. However, there is less consensus beyond summer. Operators see less than 50% possibility of a reduction in September. A rate cut is almost completely valued by the end of the year.

LIBRA ESTERLINA – FREQUENTLY QUESTIONS


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

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