- The GBP/USD remained stable on Monday while the markets take a break.
- Global markets saw a strong rebalancing of feeling after weakening in the US labor numbers.
- The last decision on the interest rates of the BOE is on the horizon for this Thursday.
The GBP/USD stopped its progress on Monday, staying stable near the level of 1,3300 after a strong rebound caused by the recent weakness of the dollar thanks to an unexpected weakening in the US labor data at the end of last week. The data agenda is relatively quiet this week on both sides of the Atlantic, although the last decision on the interest rates of the Bank of England (BOE) is coming on Thursday.
The sterling pound (GBP) maintained the earnings of the week during the Monday market session, and remains anchored in the 1,3300 region after a strong technical rebound near the 200 -day exponential mobile average (EMA) around 1,3150. A change in the flows of the dollar helped break a six -day run in the cable, but now the load falls on the GBP bulls to keep things in balance before the next decision of BOE rates.
Next step: BOE rates cut?
The BOE is prepared to cut interest rates on Thursday, with market forecasts that expect the Monetary Policy Committee (MPC) to vote 7 to 3 in favor of a quarter of a quarter, carrying the main reference rate of the BOE to 4.0% from 4.25%. If the BOE coincides with market expectations and cuts interest rates this week, it will be the seventh rate cut of the Central Bank of the United Kingdom since the BOE began to reduce rates in July 2024.
GBP/USD hourly chart
GBP/USD daily graphics
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.
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