- The GBP/USD recovered on Tuesday, promoted by the holders of an imminent commercial agreement between the US and the United Kingdom.
- Specific details remain limited, but GBP markets were encouraged by the hope of avoiding US tariffs.
- The sterling pound set 0.4% higher against the dollar after testing the level of 1,3400.
The GBP/USD rose on Tuesday, increasing four tenths of one percent in the day and testing the 1,3400 area after the holders of a possible commercial agreement between the US and the United Kingdom that would allow the United Kingdom to avoid the weight of the commercial tariffs that the Trump administration is actively chasing.
The next decision of the Federal Reserve (FED) scheduled for Wednesday remains the key event of the week market. Although the markets generally anticipate another pause in the Fed rates, investors will be attentive to the comments of those responsible for policies, specifically the statement of the president of the FED, Jerome Powell, in search of signs that the Fed could be pivoting towards a cycle of cuts cuts sooner than later.
Fed and Boe in a double event this week
The FED has been under pressure on multiple fronts to reduce interest rates recently: market participants are always in search of cheaper financing options, and the Trump administration has been incredibly vocal and adamant in which the work of the Fed should be to lower interest rates to make the US debt service cheaper and maintain price volatility under control, however, these key aspects of the FED mandate are largely ignored by the US president Donald Trump.
The Bank of England (BOE) will continue to the action of Wednesday’s Fed with its own decision of Tasas on Thursday. Unlike the Fed, the BOE is expected to deliver another cut of a quarterfinal, with the Monetary Policy Committee (MPC) of the expected BOE to vote nine to one in favor of delivering its fourth rate cut since August last year.
GBP/USD price forecast
Despite a firm bullish performance on Tuesday, the GBP/USD is still involved in a short -term consolidation range between 1,3450 and 1,3250. The price action is inclined towards the middle of the range, with technical oscillators showing that the impulse has been largely exhausted in the cable markets.
The GBP/USD remains well supported above the 200 -day exponential mobile average (EMA), however, a greater bullish impulse will require a strong performance of the bidders who have remained trapped below the 1,3400 area at the moment.
GBP/USD daily graphics
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.
