- The GBP/USD can be seen as the US dollar loses ground after the moderate comments of the Fed.
- The president of the Fed of San Francisco, Mary Daly, said that waiting for two rate cuts this year is a “reasonable” perspective.
- The sterling pound received support from mixed employment figures in the United Kingdom.
The GBP/USD gains ground after registering small losses in the previous session, quoting around 1,3440 during Friday’s Asian hours. The torque can be seen as the US dollar (USD) weakens due to the DOVISH comments of the Federal Reserve officials (FED).
The president of the Fed of San Francisco, Mary Daly, said that waiting for two rates cuts this year is a “reasonable” perspective, while warning against waiting too much. Daly added that rates will eventually be stabilized by 3% or more, which is higher than the neutral rate prior to the pandemic.
The governor of the Fed, Christopher Waller, said at the end of Thursday that he believes that the US Central Bank should reduce its interest rate objective at the July meeting, citing growing economic risks. Waller added that delaying cuts runs the risk of needing a more aggressive action later.
However, the US dollar gained ground after the US retail sales data stronger than expected on Thursday. The US retail sales increased an intermensual 0.6% in June compared to -0.9% previous. This figure exceeded the market consensus of 0.1%. Meanwhile, annual retail sales rose 3.9%, compared to an increase of 3.3% in May. The consumer’s feeling index of the University of Michigan, construction permits and housing beginnings will be observed later on Friday.
The GBP/USD torque also received support since the sterling pound (GBP) benefited from a mixed labor market report (UK), which showed more employment levels but also a higher unemployment rate.
The ilo unemployment rate of the United Kingdom increased to 4.7% in the three months until May, compared to market expectations of remaining unchanged by 4.6%. The change in the number of applicants showed that the number of people requesting unemployment benefits increased by 25.9K in June, compared to a revised increase of 15.3K in May, above the expected figure of 17.9K.
LIBRA ESTERLINA – FREQUENTLY QUESTIONS
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.
