- The GBP/USD slows weekly losses as the US dollar weakens amid concerns about trade and growth.
- The manufacturing PMI of the United Kingdom was reviewed up to 46.4 in May, above the reading of April, offering some relief before the slowdown in the sector.
- The United Kingdom MPC will testify on Tuesday at the hearings of the Monetary Policy Report; The future orientation at the Center for Care.
- The president of the FED, Powell, avoids comments on politics, putting the speakers of the FED and the NFP in the center of attention.
The sterling pound (GBP) is recovered at the beginning of the week, moving against the US dollar (USD) on Monday and reducing the losses of last week. The GBP/USD torque is bouncing modestly as investors reduce their US dollar holdings amid persistent uncertainty about global economic perspectives.
At the time of writing, the GBP/USD torque is quoted about 1,3540, moving away from the maximum intradic of 1,3559. The torque experienced a strong rally earlier in the day, but struggled to maintain profits as the purchase interest decreased in a cautious market tone.
The US dollar was under renewed pressure after President Trump announced plans to double tariffs on steel and aluminum imports, a movement that revived global commercial tensions. Meanwhile, China opposed the latest commercial accusations, which increased the caution of investors and dragged the US dollar index (DXY) back to the minimum of last week, which had been quoting around 98.80.
In the Data Front, the Index of Purchasing Managers (PMI) Manufacturing ISM of the United States fell to 48.5 in May from 48.7 in April, marking the most acute contraction since November 2024 and underlining the persistent weakness in the sector. In the United Kingdom, the Global S&P manufacturing PMI was reviewed at 46.4 in May, above the preliminary estimate of 45.1 and improving the reading of April, noting that the conditions remain weak but stable in the industrial sector.
Adding to the policy narrative, the person in charge of the Bank of England (BOE), Catherine Mann, said that the Central Bank should pay more attention to the impact of its quantitative hardening program (QT) under financial conditions, especially now that it has begun to cut interest rates. In statements published by Reuters On Monday, Mann emphasized that “now that MPC is reducing restrictivity, we need to consider the different effects of our policies in different parts of the performance curve and its effects on the transmission of monetary policy as a more relevant issue.”
Looking ahead, with the feeling of even fragile risk, market participants will close Non -Agricultural Payroll (NFP) of Friday.
In the United Kingdom, attention focuses on the PMI of services later this week, a key indicator of the largest sector of the economy. Meanwhile, the governor of the BOE, Andrew Bailey, and other members of the Monetary Policy Committee (MPC) will appear before Parliament on Tuesday for the hearings of the Monetary Policy Report, providing an additional context on the reduction of May rates and the evolution of the political position of the BOE.
BOE FAQS
The Bank of England (BOE) decides the monetary policy of the United Kingdom. Its main objective is to achieve prices stability, that is, a constant inflation rate of 2%. Your instrument to achieve this is the adjustment of basic loan rates. The BOE sets the type to which it provides commercial banks and to which banks lend themselves to each other, determining the level of interest rates in the economy in general. This also influences the value of sterling pound (GBP).
When inflation exceeds the objective of the Bank of England, it responds by raising interest rates, which makes access to credit for citizens and companies more expensive. This is positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for world investors to invest their money. When inflation falls below the objective, it is a sign that economic growth is slowing down, and the Bank of England will consider the possibility of lowering interest rates to reduce credit in the hope that companies ask to borrow to invest in projects that generate growth, which is negative for sterling pound.
In extreme situations, the Bank of England can apply a policy called Quantitative Easing (QE). The QE is the process by which the BOE substantially increases the flow of credit in a stuck financial system. The QE is a policy of last resort when the descent of interest rates does not achieve the necessary result. The QE process implies that the Bank of England prints money to buy assets, normally state bonds or corporate bonds with AAA rating, banks and other financial institutions. Which usually translates into a weakening of the pound sterling.
The quantitative hardening (QT) is the reverse of the QE, and is applied when the economy is strengthening and inflation begins to rise. While in the QE the Bank of England (BOE) buys state and business bonds from financial institutions to encourage them to grant loans, in the QT the BOE stops buying more bonds and stops reinvesting the main one that expires of the bonds it already has. It is usually positive for sterling pound.
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.
