- The GBP/USD begins the new week with a softer tone amid growing geopolitical tensions.
- The USD has difficulties in gaining significant traction and offers support to the pair.
- Operators also seem reluctant to wait for the United Kingdom CPI and Fed/BOE meetings this week.
The GBP/USD torque remains defensive below a maximum of three years reached on Friday, although it lacks bassist conviction and oscillates in a narrow range around 1,3500 during the Asian session. The operators seem reluctant and choose to wait for this week’s key data and the risks of central banks events before positioning themselves for the next phase of a directional movement in cash prices.
The latest inflation figures to the United Kingdom consumer will be published on Wednesday before the Monetary Policy Meeting of the Bank of England (BOE) on Thursday, which will play a key role in the influence on the sterling pound (GBP). In addition, the US Federal Reserve (FED) is expected to announce its policy decision on Wednesday, which will promote the US dollar (USD) and provide significant impulse to the GBP/USD torque.
Meanwhile, the weak figure of the GDP of the United Kingdom on Friday, which showed that the economy contracted more than expected, in 0.3% in April, raised the expectations that the BOE will cut the interest rates more aggressively than anticipated. The USD, on the other hand, receives some global flight support, fed by the increase in geopolitical tensions in the Middle East, and helps to limit the upward potential of the GBP/USD torque.
However, the growing acceptance that the US Central Bank will also resume its cycle of feature cuts in September, in the midst of relaxation signals of inflation in the US, slows the USD bullies when opening aggressive bets. In addition, a generally positive risk tone acts as a wind against for the Usd of safe refuge and offers some support to the GBP/USD torque, justifying a certain caution before confirming that cash prices have reached their maximum point.
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.
