- The sterling pound rises to about 1,3725 against the US dollar in the hope that President Trump will soon announce the Powell successor in the Fed.
- The president of the FED, Powell, warned that tariff inflation could be persistent.
- The United Kingdom employers seek to reduce their workforce to compensate for the impact of the increase in contributions to social security schemes.
The sterling pound (GBP) extends its winning streak against the US dollar (USD) for the fourth consecutive negotiation day on Thursday, reaching a new maximum of more than three years in around 1,3725 at the time of writing. The GBP/USD torque is strengthened as the US dollar faces a strong sales pressure after the president of the United States (US), Donald Trump, reiterated his attacks on the independence of the Federal Reserve (Fed), after the commitment of President Jerome Powell with a “wait and see” approach about interest rates in his semiannual testimony of two days before the Senate.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, records a new minimum of three years around 97.30.
Financial market participants have shown concerns about the interference of President Trump in the Fed operations, which is an autonomous body. This has challenged the exceptionalism of the US dollar, which could decrease its attractiveness.
A report by the Wall Street Journal (WSJ) showed earlier on the day that President Trump could announce Powell’s contestant in the Fed this summer.
Trump also described Powell as “terrible” while talking with reporters on Wednesday and confirmed that he has three or four potential contenders in mind for replacement.
“I know that within three or four people I am going to choose,” Trump said, according to Reuters. The agency’s report also indicated that the contestants would be the former Fed governor, Kevin Warsh, the head of the National Economic Council, Kevin Hassett, the current governor of the Fed, Christopher Waller, and the secretary of the Treasury, Scott Bessent.
What moves the market today: sterling pound exceeds its peers despite the growing concerns about the United Kingdom labor market
- The sterling pound exceeds its peers, except for the Japanese Yen (JPY), Thursday. The British currency wins despite the growing concerns about the United Kingdom labor market (UK) and a slight deceleration in consumer inflation expectations.
- According to a Reuters report, British cameras (BCC) affirmed that almost a third of small and medium enterprises have reduced their workforce or plan to do so while fighting to support the burden of an increase in employers’ contributions to social security schemes.
- In the Autumn Declaration, the Treasury Chancellor Rachel Reeves announced an increase in the contribution of employers to the National Insurance (NI) from 13.8% to 15%.
- This week, the governor of the Bank of England (BOE), Andrew Bailey, also warned about the risks in the labor market in his testimony before the Committee of Economic Affairs of the Lords. Bailey said the Central Bank has begun to see “a weakening of the labor market and expects the salary agreements to decrease.” He added that the increase in employers’ contribution to social security schemes seems to be “affecting the labor market.”
- Meanwhile, a CITI/Yougov survey showed Wednesday that the public inflation expectations for one year have decelerated 3.9% in June since 4% in May. Such scenario forces operators to increase their bets in favor of more interest rate cuts.
- In the US region, investors expect the data of the US Expenditure Price Index (PCE) of the US for May, which will be published on Friday. The PCE inflation report is expected to show that price pressures grew at a faster rate.
- The signs that inflationary pressures are accelerating would increase the market expectations that Fed could maintain interest rates at their current levels for longer. However, the soft numbers are unlikely to accelerate the Fed Dovish bets, since Jerome Powell said in the two -day testimony that the Central Bank will closely monitor the impact of tariffs on inflation in June and July.
- Powell declared in his testimony that the Central Bank is cautious when considering cuts of interest rates, since “tariff -driven inflation could lead to persistent inflation” in the economy.
Technical analysis: The pound sterling jumps above 1,3700
The sterling pound records a new three years above 1,3700 against the US dollar on Thursday after breaking above the horizontal resistance near the maximum of June 13 around 1,3630. The 20 -day exponential (EMA) mobile average, which is inclined to the rise, around 1,3535 suggests that the short -term trend is upward.
In addition, the 14 -day relative force index (RSI) jumps about 65.00, suggesting that the impulse is upwards.
Looking down, the minimum of Monday around 1,3370 will act as a key support zone. On the positive side, the maximum of January 13, 2022, around 1,3750, will act as the key barrier.
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.
