- The EUR/GBP weakens around 0.8420 in the first measures of the European session on Monday.
- The president of the ECB, Lagarde, said that the Central Bank is in a good position regarding interest rates.
- The United Kingdom Employment Report will be the center of attention later on Tuesday.
The EUR/GBP crossing is traded in negative territory for the second consecutive day about 0.8420 during the European session on Monday. The decision of the US President Donald Trump last week to double tariffs on the imports of steel and aluminum of the Eurozone from 25% to 50% continues to weigh on the euro (EUR). Investors will closely follow the United Kingdom Employment Report, which will be published later on Tuesday.
The increase in tariffs on steel and aluminum imports by the Trump administration does not apply to the United Kingdom, which will continue to pay 25% to July 9. The uncertainty related to the possible US tariffs could interrupt the growth in the eurozone and drag the EUR downwards in front of the sterling pound in the short term.
The markets continue to value the monetary policy perspective of the European Central Bank (ECB) issued last week, which could boost the common currency. The ECB announced last week that it reduced the key rates in 25 basic points (PBS) after the June policy meeting. The president of the ECB, Christine Lagarde, said they could be approaching at the end of the flexibility cycle. Lagarde also declared during the weekend that the Central Bank rates are now in a “good position” despite the high uncertainty caused by Trump’s tariff threats.
Operators will be attentive to the United Kingdom employment data on Tuesday. The unemployment rate is expected to rise slightly 4.6% in the three months to April from 4.5% in the previous reading. It is estimated that the number of people requesting unemployment benefits will increase by 4.5K in May. In case of a stronger result than expected, this could boost sterling pound and create a wind against the crossing.
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.
