- The GBP/USD quotes in negative territory for the second consecutive day about 1,3405 in the Asian session on Monday.
- The US dollar gains traction after the US attack to Iran during the weekend.
- Retail sales fell by 2.7% intermensual in May, weighing on sterling pound.
The GBP/USD pair extends the fall to around 1,3405 during the Asian negotiation hours on Monday. The fears that will be retaling against US attacks to their nuclear sites increase safe refuge flows, supporting the US dollar (USD). Investors expect the preliminary reading of the purchasing managers index (PMI) for June of the United Kingdom and the US, which will be published later on Monday.
The United States carried out air attacks in three nuclear sites in Iran early on Sunday despite the long -standing promises of US President Donald Trump to avoid new conflicts abroad, according to Bloomberg. Trump said that the key nuclear enrichment facilities of Iran had been “totally destroyed” and warned “much greater” attacks unless Iran agreed to make peace. Iran has promised to answer, saying that “it reserves all the options.” The growing tension in the Middle East and the fears of a broader conflict increase the demand for safe refuge assets, which raises the dollar against the cable.
The negative retail sales data of the United Kingdom led the operators to increase bets on additional cuts of interest rates by the Bank of England (BOE), weighing on the pound sterling (GBP). Retail sales of the United Kingdom fell an intermencing 2.7% in May compared to an increase of 1.3% previous (reviewed from 1.2%), the National Statistics Office (ONS) reported on Friday. This figure was below the market consensus of a 0.5%drop.
The BOE decided to keep the rates at 4.25% at its June policy meeting on Thursday, as expected widely. The governor of the BOE, Andrew Bailey, said that interest rates remain on a gradual road down, but warned: “The world is highly unpredictable.” Economists surveyed by Reuters expect those responsible for the BOE policy to cut the rates at 25 basic points (PB) at the next meeting in August and reduce another 25 bp in the fourth quarter.
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.
