- The EUR/GBP collapses to around 0.8525 in the first bars of the European session on Thursday.
- The solid data of the United Kingdom PMI supports the sterling pound and create an obstacle to the crossing.
- The governor of the BOE, Bailey, sees more signs of a labor market in softing.
The EUR/GBP cross loses traction about 0.8525 during the early European session on Thursday, pressured by a stronger sterling pound (GBP) in general. The operators will be attentive to the speech of the governor of the Bank of England (BOE), Andrew Bailey, later on Thursday.
Business activity in the United Kingdom expanded modestly in June, which provides some support for the GBP. The PMI composed of Global S&P of the United Kingdom rose to 50.7 in June compared to 50.3 previous, stronger than the expected 50.5. In addition, the services sector, which dominates the economy of the United Kingdom, registered its fastest growth in three months and exceeded its German and French counterparts in June.
The governor of the BOE, Andrew Bailey, said Tuesday that there were now signs that the United Kingdom labor market was softening, and emphasized his opinion that interest rates will probably continue to fall. The Central Bank of the United Kingdom maintained interest rates without changes in 4.25% at the June meeting, although three of the nine members of the Monetary Policy Committee (MPC) voted in favor of cutting the interest rates.
The Bailey speech of the BOE will be the culminating point later in the day. Any moderate comments of those responsible for policies could drag the loss of sterling down and limit the descent of the crossing.
In the front of the euro, the officials of the European Central Bank (ECB) are expected to face economic risks by decline considering the uncertainty about the tariff policy imposed by the US. The operators will take more clues of the speeches of those responsible for the ECB. Luis de Guindos and Isabel Schnabel of the ECB are scheduled to speak later on Thursday.
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.
