- The GBP/USD attracts some buyers around 1,3460 in the first part of the European session on Wednesday.
- The United Kingdom CPI inflation was reduced to 3.4% year -on -year in May, as expected
- The decision on the Fed interest rate will be the center of attention later on Wednesday, without changes in the expected rate.
The GBP/USD PAR is strengthened about 1,3460 during the first hours of European negotiation on Wednesday. The sterling pound (GBP) remains firm against the US dollar after the inflation report of the United Kingdom consumer price index (CPI). The attention will be transferred to the decision on the Federal Reserve Interest rate (FED) of the US Later on Wednesday.
The data published by the United Kingdom National Statistics Office on Wednesday showed that the country’s general CPI increased by 3.4% year -on -year in May, compared to an increase of 3.5% in April. This reading was in line with the market consensus. The underlying IPC, which excludes volatile food and energy prices, rose 3.5% year -on -year in May compared to the previous 3.8%, softer than the 3.6% expectation.
Meanwhile, the monthly inflation of the United Kingdom CPI was reduced to 0.2% in May from 1.2% in April. The markets projected an increase of 0.2%. The sterling pound maintains a positive position in an immediate reaction to the mixed inflation data of the United Kingdom IPC.
As for the US dollar, the Fed is expected to maintain indebtedness costs without changes in its June meeting on Wednesday. The operators now see a possibility of almost 80% of a Fed feat cut in September, followed by another in October, according to Reuters. The operators will take more clues from the FOMC press conference. If the Fed adopts a moderate posture, the US dollar is likely to continue weakening.
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.
