- GBP/USD weakens near 1.2895 in the early stages of the Asian session on Friday.
- US Nonfarm Payrolls data will be in the spotlight later on Friday.
- UK Autumn Forecast Statement weighs on GBP.
The GBP/USD pair remains defensive around 1.2895, the lowest level since August 16, during early Asian trading hours on Friday. The major pair retreats after the UK Labor government announced its first Autumn Forecast Statement on Wednesday.
US inflation, as measured by the Personal Consumption Expenditure (PCE) Price Index, grew at a slightly faster pace than expected in September. Data released by the US Bureau of Economic Analysis (BEA) on Thursday showed that the overall PCE rose 2.1% year-on-year in September, compared to 2.2% in August, in line with the market consensus of 2.1 %.
He PCE Core, which excludes volatile food and energy prices, rose 2.7% in the same period, matching August’s rise and above the market estimate of 2.6%. According to the CME’s FedWatch tool, financial markets expect the Fed to cut the interest rate by 25 basis points (bps) at both monetary policy meetings in November and December.
Investors will closely monitor US Non-Farm Payrolls (NFP) data for October on Friday for fresh impetus. The NFP report is expected to show that the US economy added 113,000 jobs in October, while the unemployment rate is expected to remain stable at 4.1%.
On the UK front, the new UK Labor government published its first budget on Wednesday, which includes £40bn in tax increases to plug a hole in public finances and enable investment in public services.
Additionally, the UK’s Office for Corporate Responsibility (OCR) revised inflation forecasts for 2024 upward to 2.5% from the 2.2% previously estimated in March, a revision that also led traders to expect fewer interest rate cuts. by the Bank of England (BoE). This, in turn, could limit the decline of the British Pound (GBP).
The British Pound FAQs
The British Pound (GBP) is the oldest currency in the world (AD 886) and the official currency of the United Kingdom. It is the fourth most traded foreign exchange (FX) unit in the world, accounting for 12% of all transactions, averaging $630 billion per day, according to 2022 data. Its key trading pairs are GBP/ USD, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The British Pound is issued by the Bank of England (BoE).
The most important factor influencing the value of the Pound Sterling is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on whether it 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, making it more expensive for people and businesses to access credit. This is generally positive for sterling, as higher interest rates make the UK 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. In this scenario, the Bank of England will consider lowering interest rates to make credit cheaper, so that companies will take on more debt to invest in projects that generate growth.
The data released measures the health of the economy and may affect the value of the pound. Indicators such as GDP, manufacturing and services PMIs and employment can influence the direction of the Pound.
Another important data that is published and affects the British Pound is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly in-demand export products, its currency will benefit exclusively from the additional demand created by foreign buyers seeking to purchase 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.
