- The GBP/USD begins the new week with a positive note and rises to a new maximum of several years.
- The bets that the BOE will cut the rates at a slower pace support the GBP and support the pair.
- The fiscal concerns of the US and the DOVISH expectations of the Fed weigh on the USD and benefit cash prices.
It is observed that the GBP/USD torque is based on the strong upward movement last week and earns some positive traction during the Asian session on Monday. The impulse raises cash prices beyond the level of 1,3550, reaching the highest level since February 2022, and is sponsored by a combination of factors.
The sterling pound (GBP) continues with its relative higher performance backed by the optimistic retail sales figures from the United Kingdom published on Friday, which suggest that consumer expense remains a brilliant point despite a gloomy economic panorama. This, together with an inflation in April superior to the expected one, fed the speculations that the Bank of England (BOE) would pause at its next June 18 meeting and would take its time before further reducing the costs of loans.
The US dollar (USD), on the other hand, continues with its struggle to attract significant buyers in the midst of concerns that the Tax and Expenses bill will make the US budget deficit worse at a faster rate than expected. To this is added the growing acceptance that the Federal Reserve (FED) will cut the interest rates even more in 2025, which drags the USD to a minimum of almost a month and contributes even more to the positive movement of the GBP/USD torque.
Looking ahead, investors will face the publication of important macroeconomic data from the US – starting with the requests for durable goods on Tuesday, followed by the preliminary impression of GDP on Thursday. This, together with the Minutes of the FOMC meeting on Wednesday and the US Personal Consumption Expenditure Index (PCE) on Friday, could provide clues about the FED fees cutting path, which will influence the USD and the GBP/USD torque.
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.
