- The GBP/USD has difficulty gaining significant traction in the midst of a combination of divergent forces.
- BOE rate cuts bets weigh on the GBP and largely compensate for the Usd’s bearish feeling.
- The market approach now moves towards the publication of the minutes of the FOMC meeting on Wednesday.
The GBP/USD torque begins the new week with a moderate tone and oscillates in a narrow range around mid -1,3600 during the Asian session in the middle of mixed fundamental signals.
The sterling pound (GBP) received some support last week after the announcement of Prime Minister Keir Starmer that Foreign Minister Rachel Reeves would remain in office for the foreseeable future. However, the growing possibility of a rate cut by the Bank of England (BOE) as soon as in August acts as a wind against for the GBP/USD torque. In fact, the governor of the BOE, Andrew Bailey, declared that interest rates are in descent, while the MPC member Alan Taylor, requested faster rates cuts in the midst of the risk of a sharp landing for the British economy.
However, the fall of the GBP/USD torque is still damping following the underlying bearish feeling around the US dollar (USD). Investors are still concerned that the massive tax and expenses draft of US President Donald Trump exploits the federal deficit and worsen the long -term debt problems in America. This, together with the firm expectations that the Federal Reserve (FED) will resume its cycle of feat cuts in the near future, keeps the USD near its lowest level since February 2021.
Therefore, investors will closely examine the Minutes of the FOMC meeting, which will be published on Wednesday, to obtain clues about the FED fees clipping, which will boost the demand of the USD and provide a significant impulse to the GBP/USD torque. Meanwhile, cash prices seem more likely to extend the lateral consolidation movement in the absence of any relevant economic publication that moves the market on Monday, either from the United Kingdom or the USA.
LIBRA ESTERLINA – FREQUENTLY QUESTIONS
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.
