- The GBP/USD is strengthened to around 1,3735 in the Asian session on Friday.
- Concerns about the independence of the Fed and the expectations of early cuts of fees in the US weigh on the US dollar.
- The US PCE inflation data for May will be the center of attention later on Friday.
The GBP/USD pair maintains a positive position about 1,3735 during Friday’s Asian negotiation hours. The perspective of Trump to announce the next president of the FED weighs on the US dollar (USD) compared to the sterling pound (GBP). The data of the US Personal Consumption Expenditure Index (PCE) for May will be at the Care Center later on Friday.
Concerns about the future independence of the Fed continue to undermine the dollar and create a tail wind for the main torque. The president of the USA, Donald Trump, said he was considering selecting the next president of the Fed, which fed new bets on rates cuts in the US Trump mentioned that he has a list of possible Powell successors reduced to “three or four people”, without appointing the finalists.
In addition, the data of the Gross Domestic Product (GDP) of the US weakest than expected also dragged the USD down. The US economy contracted faster than expected during the first three months of this year, falling 0.5%, the US Economic Analysis Office (BEA) reported Thursday. This figure was below the previous estimate and market consensus of -0.2%.
On the other hand, moderate comments from the Bank of England (BOE) could limit the potential for the main torque. The governor of the BOE, Andrew Bailey, warned earlier this week that there were now signs that the United Kingdom labor market was weakening and emphasized his opinion that it is likely that interest rates will continue to fall. The Central Bank of the United Kingdom maintained interest rates without changes in 4.25% at the June meeting, although three of the nine members of the Monetary Policy Committee (MPC) voted in favor of cutting the interest rates.
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.
