- The GBP/USD has accumulated bullish impulse and has risen to its highest level since February 2022.
- The disappointing weekly data on unemployment applications in the US weigh on the USD.
- The markets expect comments from those responsible for the Federal Reserve.
The GBP/USD won a traction in Thursday’s American session and rose to its highest level since February 2022, above 1,3600. At the time of publication, the PAR rose 0.4% in the day to 1,3605.
The generalized sales pressure surrounding the US dollar (USD) seems to be feeding the GBP/USD daily rally.
Earlier in the session, the data published by the US Department of Labor showed that the number of initial applications for unemployment benefits increased to 247,000 in the week that ended on May 31. This reading was worse than the market expectation of 235,000 and weighed on the USD.
In addition, the aggressive comments of the president of the European Central Bank (ECB), Christine Lagarde, caused a USD capitals. After the ECB’s decision to cut the key rates at 25 basic points, Lagarde said they are in a good position and that they could be approaching at the end of the current policy cycle.
Reflecting the weakness of the USD, the USD index was seen losing 0.4% in the day to 98.45.
On Friday, the US Labor Statistics Office will publish the May Employment Report. Before this key publication, several responsible for the Federal Reserve (FED) will vote speeches in the American session on Thursday. According to the CME Fedwatch tool, the markets are currently valuing around 30% probability of a 25 basic points rate cut in the Fed in July.
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.
