- The GBP/USD has difficulty gaining significant traction on Monday in the middle of mixed fundamental signals.
- A bassist USD provides support to the torque, although the discouraging GDP data from the United Kingdom on Friday limit the rise.
- Operators also seem reluctant to open aggressive bets before FED and BOE meetings this week.
The GBP/USD torque begins the new week with a tone off and oscillates inside a narrow range, around the 1,2930 region during the Asian session. However, the fundamental background justifies a certain caution before positioning for any significant corrective setback from cash prices from a maximum of four months, around the 1,2990 area reached last Wednesday.
The US dollar (USD) languishes about a minimum of several months amid concerns that the tariffs of US president Donald Trump and retaliation measures of other countries could harm the US economy. In addition, US inflation softer than expected and cooling signs in the US labor market could force the Federal Reserve (Fed) of interest several times this year. This, in turn, keeps the USD’s bulls on the defensive and acts as a tail wind for the GBP/USD torque.
The bets for a greater relief of politics by the Fed were reaffirmed by surveys of the University of Michigan published on Friday, which showed that the consumer’s feeling index collapsed to a minimum of almost 2 and a half years in March. In addition, inflation expectations shot in the midst of concerns that Trump’s aggressive economic policies would increase prices. Apart from this, a generally positive tone around Asian shares markets is observed undermining the dollar for sure shelter.
The sterling pound (GBP), on the other hand, has difficulties in attracting buyers after the discouraging national data on Friday, which showed that the economy of the United Kingdom contracted unexpectedly 0.1% in January. However, investors seem convinced that the Bank of England (BOE) will cut the rates more slowly than other central banks, including the Fed. This, in turn, favors the gBP bulls and suggests that the lower resistance path for the GBP/USD torque is upward.
The operators now look towards the US economic agenda, which includes the publication of monthly retail sales and the Manufacturing Index of Empire State, in search of some impulse later during the North American session. However, the attention will remain focused on the risks of key events of the central banks: the result of the expected monetary policy meeting of the FOMC of two days on Wednesday, which will be followed by the BOE policy meeting on Thursday.
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.
