- The EUR/GBP goes back around 0.8650 in the first bars of the European session on Thursday.
- Uncertainty about tariffs between the US and the EU weakens the euro against the sterling pound.
- The increase in market anxieties on the United Kingdom’s debt position could help limit EUR/GBP losses.
The EUR/GBP cross loses land about 0.8650, breaking the four -day streak during the first bars of the European session on Thursday. The PMI reports of services and HCOB composed of Germany and the Eurozone will be the points highlighted later on Thursday.
Inflation in the Eurozone rises in June, reaching the objective of the European Central Bank (ECB) and increasing the expectations that those responsible for policies will maintain the key interest rate without changes later this month. Financial markets predict one more reduction from ECB rates to 1.75% towards the end of the year, followed by a period of stable rates before possible increases around 2026.
USA made a new proposal to the negotiation team of the European Union (EU) last week. European negotiators will meet with their US officials later this week, hoping to reach an agreement in the next few days. European officials expect an update on commercial conversations on Friday, but the situation remains uncertain. The uncertainty about commercial tariffs between the administration of US President Donald Trump and the Eurozone could affect the feeling and drag the currency shared downward in the short term.
On the other hand, the British bonds had their greatest sale since October 2022, and the sterling pound (GBP) faces some sales pressure after the United Kingdom government drastically reduced plans to cut benefits. The recent market reaction reflects market concerns about government credibility to reduce fiscal deficits. The increase in market anxieties on the United Kingdom’s debt position could weigh on the short -term GBP and create a wind in favor for the main torque.
“It is not just the sterling pound that is significantly lower, but that the Gilts are also under a lot of pressure. I think it is only a crisis of trust in the Labor Government,” said Marc Chandler, Protection of Market Chief in Bannockburn Global Forex LLC.
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.
