- The sterling pound goes back to the US dollar to about 1,3400 before a series of US economic data, notably the publication of the Q1 GDP.
- It is expected that the US economy has expanded at a slight rhythm of 0.4% in the period from January to March.
- BOE Greene expects Trump’s tariff policy to be clearly deflationary for the economy.
The sterling pound (GBP) is corrected to about 1,3400 against the US dollar (USD) in the European session on Wednesday since its new three years of 1,3445 registered on Tuesday. The GBP/USD torque falls slightly while the US dollar (USD) advances before a series of key US economic data, notably the preliminary publication of the Q1 GDP data in the US session.
The US Economic Analysis Office (BEA) is expected to grow at a slower rhythm of 0.4% in annualized terms, much lower than the previous reading of 2.4%. Economists have anticipated moderate GDP growth in the expectations of a deceleration in economic activity due to high tariffs imposed by US president, Donald Trump, early this month.
Trump’s wide additional tariffs on its business partners have led to an increase in global economic uncertainty, including that of the United States, theoretically, Trump’s protectionist policies should boost the national industry to increase their production to compensate for the lower imports, but the constant changes in White House holders over tariffs have forced companies to pay their expansion plans.
In addition, investors will focus on the Q1 labor cost index, ADP employment change data for April and the Personal Consumer Price Index (PCE) for March. The labor cost index is expected to measure the change in the total cost of employees for a company, has constantly increased by 0.9%. In the US private sector, employers are expected to have hired new workers in April, significantly less than March 155k.
Meanwhile, the underlying PCE inflation data is expected to be the inflation indicator preferred by the Federal Reserve (FED), have grown 2.6%, slower than the 2.8% increase observed in February.
The signals of a cooling in the growth of employment and inflation pressures could increase market expectations that Fed could reduce interest rates in the June monetary policy meeting. According to the CME Fedwatch tool, there is a 65% probability that the Central Bank will reduce interest rates in June. For the May policy meeting, operators have almost discounted that the Fed will maintain interest rates without changes in the range of 4.25%-4.50%.
Fed officials have indicated that interest rates should remain at their current level until they obtain clarity on how Donald Trump’s new economic policies mold economic perspectives. On Tuesday, Trump criticized the president of the FED again, Jerome Powell, for not lowering interest rates, while commemorated his first 100 days in office. Trump did not mention Powell explicitly, but his comments and his history with him indicated.
“You are not supposed to criticize the Fed, you are supposed to let it do your own, but I know much more than him on interest rates, believe me,” Trump said.
What moves the market today: the pound sterling quotes downwards in front of its peers
- The sterling pound runs below its peers at the European negotiation hours on Wednesday, since the operators have become increasingly confident that the Bank of England (BOE) will reduce interest rates in 25 basic points (BPS) at its monetary policy meeting on May 8. The BOE Dovish bets have increased in the midst of fears that the new US tariff policy will relieve inflationary pressures and weaken the economic growth of the United Kingdom (UK).
- The BOE policy head, Megan Greene, said that the possible commercial war would be “clearly deflationary” for the United Kingdom economy, in a discussion with the group of experts Atlantic Council on Friday. Greene warned of shock waves in the labor market in the face of an increase in employers’ contribution to 15% social security schemes from 13.8%, which has entered into force this month.
- Last week, the governor of the BOE, Andrew Bailey, emphasized the need for the Central Bank to consider the risk of commercial war. “We must take the risk for growth very seriously,” Bailey said outside the spring meetings of the International Monetary Fund (IMF) in Washington.
- This week, the United Kingdom’s economic calendar has nothing important to offer. Therefore, external forces would be the main engine of the British currency.
- The sterling pound has remained backed against the US dollar in the midst of high uncertainty about the commercial war between the US and China. Washington wants China to start commercial discussions with them, given their significant dependence on their exports to the US. “I think it depends on China to descale, because they sell us five times more than we sell them,” Besent said in an interview in CNBC box of CNBC on Monday. Meanwhile, Beijing has promised to fight in the tariff war to protect their interests and dignity.
Technical Analysis: The sterling pound is maintained above all key ems
The sterling pound goes back to about 1,3400 against the US dollar from the maximum of three years of 1,3445. However, the general perspective of the torque remains bullish since all long -term exponential mobile socks (EMAS) are bowing up.
The 14 -day relative force (RSI) index bounces after cooling to 60, currently in around 65, indicating a resurgence in the upward trend.
On the positive side, the round level of 1,3600 will be a key obstacle to the torque. Looking down, the maximum of April 3 around 1,3200 will act as an important support area.
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
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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.
