- The EUR/GBP weakens up to around 0.8295 in the early European session on Tuesday.
- The unemployment rate of the United Kingdom remained stable at 4.4% in the three months until December; The change in the number of applicants was 22K in January.
- The moderate tone that surrounds the ECB could weigh on the euro.
The EUR/GBP crossing up to about 0.8295 during the first hours of European negotiation on Tuesday. The sterling pound (GBP) is strengthened after the United Kingdom employment report. Later on Tuesday, investors will be attentive to the speech of the governor of the Bank of England (BOE), Andrew Bailey, and the German Zew survey for February.
The data published by the United Kingdom National Statistics Office on Tuesday showed that the country’s ILO unemployment rate remained stable at 4.4% in all three months until December. This figure exceeded 4.5% expectations during the informed period. Meanwhile, the change in the number of applicants increased by 22K in January compared to -15.1K previous (reviewed from 0.7K), not reaching the estimated 10K figure. The GBP remains firm in an immediate reaction to the mixed employment report of the United Kingdom.
Earlier this month, the BOE cut its reference interest rate to 4.50% from 4.75%. Those responsible for the Central Bank of the United Kingdom said that inflation would probably reach 3.7% at the end of this year, almost double the 2% target of the BOE. This could lead to BOE to add the word “careful” to its message about a probable “gradual” additional reduction in indebted costs.
In the front of the euro, the moderate position of the European Central Bank (ECB) could drag the euro (EUR) down against the GBP. Those responsible for the ECB policy feel comfortable with the perspective of three more rates cuts this year, after a reduction of 25 basic points (BPS) to 2.75% last month.
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 marketed 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.
