- The sterling pound remains laterally around 1,3580 against the US dollar waiting for the Fed and BOE monetary policy ads this week.
- Investors expect both central banks to maintain interest rates without changes.
- Investors remain alert since tensions between Israel and Iran have climbed.
The sterling pound (GBP) rises about 1,3590 against the US dollar (USD) so far on Monday, remaining within Friday’s negotiation range. It is expected that the GBP/USD torque will continue to operate within a narrow range since investors have remained on the sidelines before the Federal Reserve Monetary Policy Ads (Fed) and the Bank of England (BOE), scheduled for Wednesday and Thursday, respectively.
At the beginning of the week, the US dollar index (DXY), which follows the value of the dollar against six main currencies, drops to about 98.00.
Investors will closely monitor the orientation on interest rates of both central banks, while they are expected to keep them unchanged at their current levels.
Fed officials have declared that interest rates should remain in the current range of 4.25% -4.50% for a longer time until they obtain clarity on how the imposition of new economic policies by the president of the United States (USA) Donald Trump will influence inflation and affect economic growth. Those responsible for politics have warned that Trump’s agenda could be inflationary to the economy.
In the Fed monetary policy announcement, investors will pay special attention to the points graph, which shows where those responsible for the policy that are directed at the short and long term interest rates are directed.
What moves the market today: the sterling pound rises in front of its main peers
- The sterling pound is listed up in front of its main peers on Monday, with investors waiting for the announcement of interest rates of the BOE. The Central Bank of the United Kingdom (UK) is expected to maintain the interest rates of stable loans at 4.25% on Thursday, since officials guided a “gradual and careful” monetary expansion approach, after a reduction of 25 basic points (PBS) at the May policy meeting.
- The financial market participants doubt that the BOE maintains their “gradual and careful” policy relaxation orientation, since the latest employment data for the three -month period that ended in April showed cracks in the rate of employment growth.
- The United Kingdom’s business owners decelerated their hiring rhythm to compensate for the impact of an increase in their contribution to the Social Security scheme, which entered into force in April. In the Autumn Declaration of the United Kingdom, Treasury Chancellor Rachel Reeves announced an increase in the contribution of employers to National Insurance (NI) from 13.8% to 15%.
- Before the BOE monetary policy, investors will also focus on the data of the United Kingdom consumer (ICC) index for May, which will be published on Wednesday. The United Kingdom CPI report is expected to show that pressures on prices grew at a moderate rhythm.
- At the global level, the growing geopolitical tensions in the Middle East will probably limit the appetite of investors by risk -sensitive assets, such as sterling pound. Israeli defense minister Israel Katz has threatened to accelerate attacks on Iran if he continues to launch missiles to Israel, Euronews reported. “Tehran will burn if you continue to launch attacks against Israel,” Katz said. Meanwhile, Iran has threatened to close the Ormuz Strait, the most important entrance door in the world for oil transport, Reuters reported.
Technical Analysis: The sterling pound is consolidated below 1,3600
The sterling pound remains laterally below 1,3600 against the US dollar on Monday. The short -term trend of the GBP/USD torque remains bullish since the 20 -day exponential (EMA) mobile average is inclined to rise around 1,3500.
The 14 -day relative force (RSI) index struggles to break decisively above 60.00. A new bullish impulse would arise if the RSI remains above that level.
On the positive side, the maximum of January 13, 2022 of 1,3750 will be a key obstacle to the pair. Looking down, the horizontal line drawn from the maximum of September 26, 1,3434 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.
