- The GBP/USD receives support since the US Fed is expected to cut rates in September.
- Operators expect US labor market data to obtain more impulse on the Fed policy position.
- The Bank of England adopts caution on rates cuts since inflation in the United Kingdom remains persistent.
The GBP/USD advances slightly before the Gross Domestic Product (GDP) of the United Kingdom for the first quarter, quoting around 1,3720 during Monday’s Asian hours. The torque could gain ground as the US dollar (USD) could be further depreciated, since operators expect the Federal Reserve (FED) to cut fees at the September meeting.
On Friday, the data showed that personal spending in the US fell unexpectedly in May, the second decrease this year. Meanwhile, personal income in the US fell 0.4% in May, the greatest decrease since September 2021. Next week a series of key employment figures in the US are expected, which could offer a new impulse on the Federal Reserve Policy Perspective (FED).
The June US payroll report is expected to show that the economy added 110,000 new jobs, below 135,000 in May; The estimate range is currently between a maximum of 140,000 and a minimum of 75,000. In addition, it is anticipated that unemployment increases slightly 4.3% from 4.2%.
The GBP/USD torque is also appreciated since the sterling pound (GBP) receives support from the cautious posture of the Bank of England (BOE) on the feat cuts, since inflation in the United Kingdom (UK) remains stubborn. The underlying inflation has remained largely unchanged during the last year, causing concern among BOE officials and complicating decisions about feat cuts.
Meanwhile, political tensions have climbed in the United Kingdom since Prime Minister Keir Starmer reduced the well -being reform plans to contain the rebellion of legislators in his ruling Labor Party. More than 100 Labor deputies had publicly opposed the Plan, which aimed to cut 5,000 million pounds per year of the growing well -being budget.
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.
