- The GBP/USD remains stable around 1,3280 in the Asian session on Tuesday.
- Operators are now valuing a 94% possibility of a rate reduction by the Fed in September.
- The BOE is expected to announce its monetary policy decision on Thursday.
The GBP/USD pair operates in a flat tone about 1,3280 during the Asian negotiation hours on Tuesday. However, the increase in the probabilities of federal reserve rates (FED) could weigh on the US dollar (USD) compared to the pound. Investors will be attentive to the data of the Purchase Management Index (PMI) of US ISM Services, which will be published later on Tuesday.
The US weak labor data published on Friday led investors to increase bets on imminent features of the Federal Reserve (Fed), which weakens the dollar. The growth of employment in the US did not meet expectations in July, and the non -agricultural payroll (NFP) count of the previous two months was downward in 258,000 jobs, which indicates an acute deterioration in the conditions of the US labor market.
The markets are now valuing in almost 95% the possibility that the FED reduces the fees next month due to the employment data in the US weakest than expected, with more than 63 basic points (PBS) of expected cuts for December, according to Reuters.
The decision on the interest rate of the Bank of England (BOE) will be the center of attention on Thursday. It is widely expected that the Central Bank of the United Kingdom cut the interest rates at the August meeting to prevent the economy from going back in the increase in unemployment and the impact on global trade by US tariffs.
Financial markets have discounted more than 80% probability of BOE rates cuts at the August meeting and are anticipating an additional reduction of a quarterfinal before the end of the year. The operators will closely follow the speech of Governor Bailey del BOE after the monetary policy meeting. Any moderate comments could drag the libra sterling (GBP) down in the short term.
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.
