- The GBP/USD weakens as the United Kingdom’s tax concerns continue to affect the demand for sterling pound.
- The cautious hopes of fees of the Fed rates provide some support to the US dollar
- The GBP/USD falls below the 20 -day SMA in 1,3596, with the 50 -day SMA providing support in 1,3480.
The sterling pound (GBP) is weakening against the US dollar (USD) on Tuesday, since markets expect news about commercial developments, which influences the broader economic perspectives.
For the GBP/USD, tax concerns in the United Kingdom (UK), combined with the risks of a weaker economy, have pushed prices for 1,3550 at the time of writing.
While the president of the Federal Reserve (Fed), Jerome Powell, advocates data -based decisions and has not ruled out a feat cut in July, the Fed is adopting a cautious approach in mixed economic signals. The chances of a relief in July are now minimal, and markets are increasingly pointing to September as a more likely starting point.
According to the CME Fed Watch tool, markets are valuing a 4.7% probability of a 25 basic points movement in July, compared to 20.7% of last week. The probability of a 25 basic points cut in September is now 62.8%, compared to 73.2% last week.
In the United Kingdom, tax risks are adding to the weakness of the pound. The Office of Budget Responsibility (OBR) published its report on tax and sustainability risks on Tuesday, issuing a forceful warning about the country’s long -term financial perspectives.
The president of the OBR, Richard Hughes, warned that the current tax policies of the United Kingdom are unsustainable. He anticipated that, if they are not modified, the public debt would increase to around 270% of GDP in the early 2070s from less than 100% today.
The long -term debt path is largely a consequence of the growing costs associated with the triple blockade of state pensions, the anticipated spending related to the climate (for example, transitions to zero net emissions and damages by extreme meteorological phenomena) and demographic pressures. Hughes said that state pensions costs could increase from 5% to 7% of GDP by 2070, adding more pressure to public finances.
In addition, the highest tariffs of US President Trump have scared the markets, feeding risk aversion and uncertainty among investors.
In response to these developments, the GBP/USD is falling below the single mobile average (SMA) of 20 days, which now provides resistance in 1,3596.
The current price action remains within the limits of an ascending channel in the daily chart, which has guided the torque since May.
Greater downward pressure is emerging as the price approaches the 50 -day SMA in 1,3480. A rupture below this level would indicate a deeper bearish correction towards the fibonacci setback of 23.6% of the movement from January to July in 1,3390.
The recent failure to recover the maximum of July 1, 1,3789 now confirms the presence of a maximum of the short term.
GBP/USD daily graphics
The Relative Force Index (RSI) has fallen below 49, indicating a fading of the bullish impulse, but has not yet entered the territory of overall.
The true average range (ATR) shows a contraction in volatility, which could precede a break in any direction.
The GBP/USD is vulnerable to more losses towards the channel support, with the approach now in whether buyers can defend the 50 -day SMA. A clear failure to stay above 1,3480 would confirm a deeper bassist correction, while a rebound above 1,3595 is necessary to restore the bullish impulse.
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.
