- The sterling pound decreased closer to 1,3460 against the US dollar while the dollar recovers in the midst of optimism on the commercial front between the EU and the USA.
- The improvement in commercial relations between the US and China has promoted consumer confidence in the US.
- Markets do not expect the BOE to cut interest rates in June.
The sterling pound (GBP) extends its correction to about 1,3460 against the US dollar (USD) during the European negotiation hours on Wednesday. The GBP/USD pair goes back for the second consecutive day after reaching a maximum of three years around 1,3600 on Monday, since the US dollar (USD) gains ground with the hope that the United States (USA) and the European Union (EU) soon reach a commercial agreement.
The American dollar index (DXY), which tracks the value of the dollar against six main currencies, rises to about 99.80, extending the recovery movement on Tuesday.
On Tuesday, US President Donald Trump expressed confidence in a publication in Truth. Social that the EU is increasing efforts to reach a bilateral commercial agreement. “I was extremely satisfied with the 50% tariff allocation to the European Union, especially because they were” walking slowly. “
The growing optimism on the commercial agreement between the US and the EU has helped the US dollar to recover almost losses seen Friday, when President Trump threatened to impose a 50% tariff on EU imports.
Another reason behind the recent strength of the US dollar is the optimistic data of consumer confidence in the US for May. The data, published on Tuesday, showed that consumer confidence increased substantially to 98.0 after deteriorating for five consecutive months. The comment of the Conference Board showed that the decala in commercial tensions between the US and China contributed significantly to improve the mood of households.
What moves the market today: the sterling pound takes a pause after a strong rise
- The sterling pound runs below its peers during Wednesday’s European negotiation hours. The British currency takes a pause after a strong rebound in recent days of negotiation while investors seek new clues about whether the Bank of England (BOE) will cut interest rates again at its June policy meeting.
- The BOE reduced its interest rates in 25 basic points (BPS) to 4.25% earlier this month, with a division of votes of 7-2, and guided an “gradual and cautious” rate cut approach.
- The latest strong data of the Consumer Price Index (ICC) of the United Kingdom and retail sales for April, along with the optimistic figures of the Gross Domestic Product (GDP) of the first quarter, are enough to discourage the BOE officials to cut the more interest rates.
- This month, the United Kingdom’s inflation data, closely followed by those responsible for BOE policies, accelerated abruptly to 5.4% year -on -year from 4.7% in March. Month by month, retail sales increased at a robust rate of 1.2%, compared to 0.1% seen in March. The economic growth of the United Kingdom was 0.7%, significantly higher than 0.1% recorded in the last quarter of 2024.
- The International Monetary Fund (IMF) has raised the GDP growth forecast of the United Kingdom for the current year to 1.2%, slightly above 1.1% previously anticipated, thanks to an optimistic economic performance in the period from January to March.
- This week, investors will focus on the data of the Personal Consumption Expenditure Index (PCE) for April, which will be published on Friday. Inflation data is unlikely to influence market expectations about the monetary policy of the Federal Reserve (FED), since officials are expected to remain await until they obtain clarity about the new economic policies under Trump’s leadership and the reach of their consequences in the economy.
Technical Analysis: The sterling pound falls to about 1,3460
The sterling pound goes back to about 1,3460 against the US dollar from the maximum of three years around 1,3600 on Monday. In spite of the recent decrease, the perspective of the torque remains firm since the exponential (EMA) mobile average of 20 days is inclined to rise around 1,3380.
The 14 -day relative force (RSI) index remains above 60.00, suggesting that the bullish impulse remains intact.
On the positive side, the maximum of January 2022 of 1,3750 will be a key obstacle to the torque. Looking down, the 20 -day EMA 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.
