- The EUR/GBP quotes in positive territory around 0.8625 in the first bars of the European session on Thursday.
- The EU hopes to reach an agreement on tariffs with the US “in the next few days.”
- The monthly GDP report of the United Kingdom will be published on Friday.
The EUR/GBP cross operates with slight profits about 0.8625 during the first bars of the European session on Thursday. The optimism around the agreement between the United States (USA) and the European Union (EU) supports the euro (EUR). The June inflation data of Germany will be published later on Thursday. On Friday, the attention will focus on the report of the Gross Domestic Product (GDP) of the United Kingdom.
The EU declared that she hopes to reach an agreement on tariffs with the US “in the next few days” that would avoid import taxes that Trump has threatened to impose on his products. In addition, the optimism that the White House will not point to the block with additional tariffs and that it could ensure some exceptions to the base rate of 10% could provide some support to the common currency.
Trump said Tuesday that the EU “probably” will receive a letter establishing its new US tariff rate on Thursday, since the block had gone from being “very hard” to “very friendly.”
The governor of the Bank of England (BOE), Andrew Bailey, said earlier this month that “the path of interest rates will continue to gradually down”, while the Central Bank of the United Kingdom balances the control of inflation and the promotion of elusive economic growth. Analysts expect the BOE to cut the rates at 25 basic points (PBS) at their next policy meeting in August, which would carry the interest rate to 4.0% from 4.25%.
The United Kingdom GDP report will be followed closely, and it is expected to grow an intermencing 0.1% in May, after a 0.3% contraction in the previous reading. In case of a stronger result than expected, this could reduce the possibility of a reduction of rates by the BOE, supporting the GBP.
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
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.
