- The pound sterling feed weakly in front of its main peers on Thursday, before the BOE monetary policy announcement.
- The BOE is expected to maintain stable interest rates at 4.25%, with a majority vote of 7-2.
- Tensions in the Middle East intensify due to the possibility that USA.
The pound sterling quotes down against its main peers, except antipodeans, Thursday. The British currency faces sales pressure before the monetary policy announcement of the Bank of England (BOE) scheduled for 11:00 GMT.
Investors expect the BOE to maintain stable interest rates at 4.25%, with a majority vote of 7-2. It is expected that the members of the Monetary Policy Committee (MPC) of the BOE, Swati Dhingra and Alan Taylor, support a cut of interest rates, since they supported a higher rates reduction than usual of 50 basic points at the May policy meeting.
The governor of the BOE, Andrew Bailey, guided a position of “gradual and careful” towards monetary expansion in May, reiterating that “the risks of inflation return sustainably to the goal of 2% in the medium term have dissipated.”
Meanwhile, the participants of the financial market expect the BOE to reassess their moderate policy relaxation approach after the last lot of employment data and salary growth of the United Kingdom (UK) for the three months that end in April and the data of the consumer price index (ICC) of May.
The United Kingdom labor market data showed some cracks in the growth of employment and salaries due to an increase in employers’ contributions to social security schemes. Moderate salary growth led to a slowdown in inflation in the services sector, which is closely monitored by BOE officials. Inflation in services cooled to 4.7% from 5.4%.
Investors will also focus on Andrew Bailey’s press conference after the monetary policy decision to obtain clues about the impact of possible energy clashes, derived from tensions in the Middle East, on inflation perspectives.
What moves the market today: the pound sterling has a lower performance than the US dollar
- The sterling pound slips about 1,3400 against the US dollar (USD) during Thursday’s European negotiation hours. The GBP/USD torque faces sales pressure as the US dollar (USD) wins, while tensions in the Middle East have increased the demand for safe refuge assets. Another reason behind the fortress of the US dollar is the downward review in the forecasts of interest rate cuts by the Federal Reserve (Fed) in 2026 and 2027.
- The tensions around war between Israel and Iran have intensified as Washington assembles military team in the Middle East to attack Tehran. According to a Bloomberg report, senior US officials are preparing to attack Iran in the next few days. Market experts believe that US participation in Iran would accelerate geopolitical tensions, a scenario that could further strengthen the demand for safe refuge assets.
- Earlier this week, the US also mobilized some defense teams towards the Middle East. However, Washington clarified that military activity aims to protect its bases located in the region. “We are defensively positioned in the region to be strong, in search of a peace agreement,” said US Secretary of Defense, Pete Hegseth, in an interview with Fox News.
- In the economic data front, the FED maintained its stable reference interest rates in the range of 4.25% -4.50% per fourth consecutive meeting and retained the guide of two interest rate cuts this year. However, the Fed reviewed the objective of interest rates for 2026 to 3.6%, from 3.4% projected in March, suggesting that the Central Bank sees disagree expectations. By 2027, the Fed expects interest rates to remain stable at 3.4% throughout the year. The president of the Fed, Jerome Powell, has warned about the risks of stagflation, citing that “the effects of tariffs will depend on the level, and this year’s increases will probably weigh on economic activity and increase inflation.”
Technical Analysis: The sterling pound descends about 1,3400
The sterling pound extends its loss streak for the third day of negotiation on Thursday against the US dollar, sliding around 1,3400. The short -term trend of the GBP/USD torque has become bassist since it has fallen below the 20 -day exponential (EMA) mobile average, which currently quotes around 1,3480.
The 14 -day relative force (RSI) index falls about 40.00, where it is likely to find support. A new bearish impulse would arise if the RSI slides below that level.
Looking down, the minimum of May 16 around 1,3250 will act as a key support zone. On the positive side, the maximum of three years around 1,3630 will act as a key barrier.
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.
