- The GBP/USD receives support from a modest recoil of the USD, although the bullish potential seems limited
- The reduced expectations for cutting fees of the Fed and commercial nerves could underpin the secure shelter dollar and limit the torque.
- The weak GDP of the United Kingdom on Friday reaffirms the expectations of cutting the BOE rates in August and could act as a wind against the GBP.
The GBP/USD torque enters a bass consolidation phase during the Asian session and oscillates in a narrow range around the 1,3500 psychological brand, just a few PIPs above a minimum of three weeks reached on Friday. In addition, the fundamental background suggests that the lower resistance path for cash prices remains down.
A modest recoil of the US dollar (USD) from its highest level since June 25 turns out to be a key factor that provides some support to the GBP/USD torque. However, the diminished probabilities of a short -term reduction in indebtedness costs by the Federal Reserve (FED), amid concerns that the commercial tariffs of US President Donald Trump would increase inflation, they should act as a tail wind for the dollar. Apart from this, the impulse of risk aversion could further benefit the status of secure refuge of the dollar and contribute to limit the currency pair.
In a new escalation of the commercial war, Trump imposed a 30% tariff on imports from Mexico and the European Union as of August 1. This adds to a series of more than 20 similar tariff notices that Trump has issued since last Monday and a 50% tariff to the copper imports of the US, which continues to weigh on the feeling of investors. Risk aversion flow is evident in a generally weaker tone around stock markets and should limit any significant corrective fall for the dollar of safe shelter and limit the GBP/USD to the PAR.
Meanwhile, the United Kingdom National Statistics Office reported Friday that the economy contracted unexpectedly for the second consecutive month, 0.1% in May, after a 0.3% drop recorded in April. In addition, the industrial production of the United Kingdom fell at a faster rate of 0.9% compared to the 0.6% drop in April, while manufacturing production was also below estimates and decreased by 1% in May. This reinforces the bets that the Bank of England (BOE) could reduce interest rates in August and should weigh on the sterling pound (GBP).
Operators could also refrain from aggressive bets before this week’s publication of the latest inflation figures to the US consumer and the United Kingdom, scheduled for Tuesday and Wednesday, respectively. In addition, the appearance of the governor of the BOE, Andrew Bailey, on Tuesday and the speeches of influential members of the FOMC should contribute to providing a significant impulse to the GBP/USD couple.
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.
