- The GBP/USD moves little while the operators remain cautious in the midst of the growing uncertainty about Trump’s plans for tariffs.
- Trump said he will begin sending letters on commercial tariffs to other countries from Friday.
- The governor of the BOE, Bailey, said that interest rates should be gradually reduced, since inflationary pressures seem to be decreasing.
The GBP/USD remains firm for the second consecutive day, quoting around 1,3660 during Friday’s Asian hours. The pair remains stable while the US dollar (USD) depreciates, since operators adopt caution, looking for clarity on the plans of US President Donald Trump for tariffs in several countries. On Thursday, Trump told journalists that “it will begin sending letters on commercial tariffs starting Friday.” He added that he would send letters to 10 countries at the same time, establishing tariff rates from 20% to 30%, Reuters reported.
The GBP/USD pair maintains its position while the pound sterling (GBP) receives support after the defense of Prime Minister (PM) Keir Starmer to Chancellor Rachel Reeves. The PM Starmer said that she would remain in her chancellor position “for a long time.” This helped relieve market concerns that a possible replacement could adopt a more lax fiscal position with an increase in indebtedness.
The Bank of England (BOE) is expected to deliver an interest rate cut in August, carrying the base rate of the central bank to 4%, after the moderate comments of the officials. The governor of the BOE, Andrew Bailey, told CNBC on Tuesday that interest rates should gradually lower, since inflationary pressures seem to be decreasing.
Meanwhile, the BOE policy head, Alan Taylor, spoke in the European Central Bank forum (ECB) on Central Banking, in Sintra, on Wednesday, saying that I do not think they need or wish larger cuts. Everything must be considered; We are not on a pre -established path on the rates, Taylor added.
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.
