- The sterling pound advances to about 1,3380 against the US dollar, since Moody’s reduced US sovereign debt and new concerns about trade between the US and China arise.
- China accused the US of undermining recent commercial conversations after Washington warned about the use of Huawei’s chips worldwide.
- The United Kingdom ensures an “Restart” agreement with the EU after signing trade agreements with India and the USA.
The sterling pound (GBP) rises to about 1,3380 against the US dollar (USD) during the European negotiation hours on Tuesday. The GBP/USD pair wins for the second consecutive day while the US dollar continues to suffer due to a reduction in the US sovereign credit rating by Moody’s. The US dollar index (DXY), which follows the value of the dollar against six main currencies, weakens near the weekly minimum slightly above 100.00.
On Friday, Moody’s reduced the long -term emitter and unusual debt ratings of the US of AAA1 due to the growing amount of US government debt of 36 billion dollars. The measure generated fears of investment in US assets and substantially increased the yields of US bonds. The initial reaction of yields of the 10 -year Treasury bonds from the US after the qualification reduction was strong, reaching a new maximum of more than a month of around 4.56%. After the initial shock, the yields have fallen back to about 4.45%.
Another reason why the US dollar remains defensive is the accusation of China to the US to undermine high -level commercial conversations in Geneva last weekend. The accusation of Beijing to Washington occurred after the comments of the US Department of Commerce last week that discouraged the use of artificial intelligence (AI) chips of Huawei and Chinese models. According to a spokesman for the Chinese Ministry of Commerce, The US Department of Commerce Department is “discriminatory” and “market distorting”, which led Beijing to “demand that the administration” correct its errors. “
A Bloomberg report showed last week that the Department of Commerce said it was issuing a guide to make it clear that “the use of Huawei Ascend chips is a violation of US government export controls.” The agency also warned the public about “the possible consequences of allowing US US chips to be used for training and inference of Chinese models.”
Meanwhile, investors look for new clues about how much the Federal Reserve (Fed) will cut interest rates this year. A series of Fed officials have urged patience, since they need more data to evaluate economic perspectives after significant changes in economic policy. On Monday, The president of the Atlanta Fed Bank, Raphael Bostic, declared that inflation will now take more time to return to 2% and anticipated an interest rate cut this year.
Daily summary of the market movements: the sterling pound exceeds the rest while the United Kingdom and the EU ensures a “restart” agreement
- The sterling pound is listed up in front of its peers, except the Japanese yen (JPY), on Tuesday. The British currency wins as the United Kingdom signs an agreement with the European Union (EU) on trade, defense and security that deepens its ties with the continent after Brexit. This is the third bilateral agreement of the United Kingdom after closing two with India and the United States (USA) this month.
- The main prominent aspects of the agreement between the United Kingdom and the EU are the health and phytosanitary agreement (SPS) that seeks to withdraw routine controls on animal and plants products, the participation of Great Britain in the historic expense in defense of the Eurozone and an investment of 360 million pounds in the fishing industry.
- The strong ties between the EU and the United Kingdom in a moment of possible global economic agitation due to the reprisals of tariff by US President Donald Trump are favorable for both economies.
- On the domestic front, investors expect the data of the United Kingdom Consumer Price Index (CPI) for April, which will be published on Wednesday. According to the CPI, the underlying inflation is expected to exclude volatile components of food, energy, alcohol and tobacco – has grown at a faster rate of 3.7%, compared to 3.4% in March. It is estimated that the general CPI has increased at a robust pace of 3.3% compared to the previous publication of 2.6%.
- The data that show accelerated price pressures would force operators to reduce bets that support additional cuts of interest rates by the Bank of England (BOE). At the beginning of the month, the BOE cut the key interest rates in 25 basic points (PBS) to 4.25%, with a divided vote of 7-2 and guided an “gradual and cautious” rate cutting approach. Two of the seven members of the Monetary Policy Committee (MPC), Swati Dhingra and Alan Taylor, voted in favor of a larger rate reduction of 50 PBS. On Monday, Dhingra clarified that he favored a higher rates cut than usual to show where the economy is directed. “I choose moments when I want to be able to make a more categorical statement about where I think the economy is directed,” Dhingra said in a podcast interview with Financial Times (FT), Reuters reported.
Technical Analysis: Libra sterling demonstrates strength around 1,3400
The sterling pound firmly quotes around 1,3380 against the US dollar on Tuesday. The GBP/USD torque is maintained above the 20 -day exponential (EMA) mobile average, which quotes around 1,3280, which suggests that the short -term trend is upward.
The 14-day Relative Force Index (RSI) points to the upper limit of the range of 40.00-60.00. A new bullish impulse would appear if the RSI breaks above 60.00.
On the positive side, the maximum of three years of 1,3445 will be a key obstacle to the torque. Looking down, the psychological level of 1.3000 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
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.
