- The low sterling pound below 1,3500 against the US dollar before the US CPI data for May.
- Weak employment data in the United Kingdom pave the way for a trim of BOE interest rates in August.
- Commercial tensions between the US and China seem to have decreased after a two -day meeting in London.
The sterling pound (GBP) quotes down near 1,3480 against the US dollar (USD) during the European negotiation hours on Wednesday. The GBP/USD pair goes back while the US dollar remains stable in general before consumer price index (CPI) of the United States (USA) for May, which will be published at 12:30 GMT.
The dollar index (DXY), which follows the value of the dollar against six main currencies, rises slightly to about 99.15.
Investors will pay special attention to US inflation data as they will influence market expectations on the monetary policy of the Federal Reserve (FED). According to the CPI, general inflation is expected to have increased to 2.5% year -on -year from 2.3% in April. In the same period, the underlying IPC is expected to exclude volatile food and energy prices – 2.9%have grown faster than the previous 2.8%. Monthly, it is expected that both the general and underlying CPI have grown 0.2% and 0.3%, respectively.
The signals of acceleration price pressures would allow Federal Reserve officials (FED) to commit to stable interest rates until they obtain clarity about the result of the tariff policy of US President Donald Trump after his return to the White House.
Even if inflation data turns out to be lower than expected, it is unlikely that those responsible for the FED support anticipated interest rate cuts, since they have cited concerns about the disagreement of consumers’ inflation expectations under the leadership of Donald Trump.
In the global field, commercial tensions between the US and China have broken down something, since the White House has indicated a positive result of the two -day meetings among commercial representatives of both countries held in London. The US Secretary of Commerce, Howard Lutnick, expressed confidence that both nations will reverse export restrictions.
What moves the market today: the pound sterling extends its low performance in front of its peers
- The sterling pound extends its downward movement against its main peers on Wednesday, prolonging the mass sale of the previous day. The British currency faces a strong sales pressure on Tuesday after the United Kingdom National Statistics Office (ONS) reported a weak set of labor market data for the three months prior to April.
- The data showed emerging cracks in the United Kingdom labor market, since the decision of the Treasury Chancellor, Rachel Reeves, to increase employers’ contribution to 15% social security schemes from 13.8% entered into force in April.
- According to the report, the unemployment rate accelerated to 4.6%, the highest level seen since July 2021. In addition, labor demand slowed down significantly and wages grew at a moderate pace.
- Weak employment data in the United Kingdom have increased market expectations that the Bank of England (BOE) will reduce interest rates more than investors had previously projected. “Weak jobs and slower salary growth can tip the balance in favor of a cut in August,” HSBC analysts said.
- Later this week, investors will focus on the Gross Monthly Internal Product of the United Kingdom and industry data for April, which will be published on Thursday. The economy of the United Kingdom is expected to have contracted 0.1% after expanding 0.2% in March. Monthly, it is expected that both manufacturing and industrial production data have contracted again.
Technical Analysis: The pound sterling correlates near the 20 -day EMA
The sterling pound descends near the exponential (EMA) mobile average of 20 days around 1,3467, indicating uncertainty in the short -term trend. The GBP/USD torque faced sales pressure on Tuesday after not being able to visit the maximum of three years of 1,3617.
The 14 -day relative force index (RSI) falls sharply towards the neutral level of 50, indicating that the bullish potential is limited.
On the positive side, the maximum of three years of 1,3617 will be a key obstacle to the pair. Looking down, the minimum of May 15, 1,3258 will act as a key support zone.
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.
