- The sterling pound is under pressure on Tuesday, since the BOE official, Catherine Mann, expresses concern for the weak demand and points out cracks in the labor market.
- The president of the United States, Trump, imposes 25% tariffs on steel and aluminum and is about to announce reciprocal tariffs.
- Investors expect the speech of the presidents of the BOE and the FED, Andrew Bailey and Jerome Powell on Tuesday.
The sterling pound (GBP) weakens in front of its main peers in the European negotiation hours on Tuesday after a moderate comment from the member of the Monetary Policy Committee (MPC) of the Bank of England (BOE), Catherine Mann, in an interview With the Financial Times (FT) earlier in the day.
Investors were waiting with interest in Catherine Mann’s interview to learn about the reasons that led her to favor a greater reduction of interest rates in the policy decision last week, after being a vocal hawk for a long period.
Mann said he changed his mind about politics because “demand conditions are much weaker than the case has been.” Thus, his call to a cut of 50 basic points (PB) was a way of communicating with the operators about “what we think are the appropriate financial conditions for the United Kingdom economy (UK).”
When asked about his perspective on inflation and demand, Mann was confident that inflation would remain consistent with the target of the BOE of 2% later this year and saw a “non -linear” fall in employment.
Last week, the BOE reduced its key interest rates in 25 PB to 4.5%, as expected, with a 9-0 vote in favor of a cut. Seven MPC members voted in favor of a 25 -PB rate reduction. Surprisingly, Catherine Mann joined the MPC member, Swati Dhingra, and favored a higher rate cut than usual.
In Tuesday’s session, investors will focus on the speech of the governor of BOE, Andrew Bailey, at the Booth Business School of the University of Chicago in London to obtain more guidance on interest rates.
What moves the market today: the sterling pound falls in front of the USD while Trump imposes 25% tariffs on steel and aluminum
- The pound sterling contributed contained against the US dollar (USD) around 1,2350 in the European session on Tuesday. The GBP/USD PAR perspective remains bassist, since the US dollar runs strongly under the assumption that the impact of 25% tariffs on steel and aluminum imports by all nations to the United States .UU.) It will be inflationary.
- On Monday, the president of the USA, Donald Trump, signed executive orders to impose 25% tariffs on all imports of steel and aluminum and confirmed that no country would be exempt from tariff March. Trump added that he will also announce reciprocal tariffs in the next few days.
- Market participants fear that American importers support the impact of the highest prices of metals. This scenario would be an inflationary for the economy, since business owners would move the impact of the highest prices of inputs to final consumers. This would force Federal Reserve officials (FED) to wait more months before resuming the policy relaxation cycle, which the Central Bank paused in January.
- To obtain significant clues about the perspective of interest rates, investors will focus on the testimony of the president of the FED, Jerome Powell, before the Congress at 15:00 GMT. Powell is also scheduled to testify to Congress on Wednesday.
- At the January policy meeting, Jerome Powell said the monetary policy settings would be appropriate only when the Fed saw “real progress in inflation or at least some weakness in the labor market.”
- This week, investors will also focus on the US Consumer Price Index (CPI) for January, which will be published on Wednesday.
Technical Analysis: The sterling pound extends its loss streak
The sterling pound extends its loss streak for the fourth day of negotiation against the US dollar and records a new weekly minimum about 1,2350 on Tuesday. The GBP/USD pair resumed its downward trajectory after recovering near the 50 -day exponential mobile average (EMA) around 1,2484.
The 14-day relative force (RSI) index oscillates within the range of 40.00-60.00, suggesting a lateral trend.
Looking down, the minimum of January 13, 1,2100 and the minimum of October 2023 of 1,2050 will act as key support areas for the PAR. On the positive side, the maximum of December 30, 1,2607 will act as a key resistance.
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.
