- The sterling pound shoots about 1,3600 against the US dollar, since a high fire between Israel and Iran has reduced the demand for safe refuge.
- The preliminary data of the United Kingdom PMI for June, better than expected, have supported the pound sterling.
- Several Fed governors promise an interest rate cut in July to support the US labor market.
The pound sterling (GBP) extends its upward movement on Monday about 1,3600 against the US dollar (USD) during the European negotiation hours on Tuesday. The GBP/USD torque is strengthened as a global risk rally driven by the high fire between Israel and Iran has decreased the demand for refuge assets as the US dollar.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, falls abruptly to about 98.13 on Tuesday from a new maximum of two weeks of around 99.40 registered the previous day.
During the late Asian negotiation hours, Iranian state media confirmed a truce with Israel, stating that “a high fire entered into force between Iran and Israel after four waves of Iranian attacks in territories occupied by Israel,” Reuters said.
On Monday night, the president of the United States (USA), Donald Trump, confirmed in a publication in Truth.Social that both Israel and Iran have agreed to a “high and total fire.”
The relaxation signs of tensions in the Middle East have made oil prices fall almost 15% from their recent maximums, which represents a great relief for oil importing countries.
What moves the market today: the pound sterling quotes up before the BOE speeches
- The sterling pound exceeds its main peers on Tuesday, except for the currencies of Asia-Pacific, receiving support from the optimistic preliminary data of the purchasing managers index (PMI) of the United Kingdom for June published on Monday and the guide of “Gradual and Calibrated Monetary Relaxation” of the Bank of England (BOE).
- The PMI report showed that the general business activity grew at a faster rate than projected. The activity of the services sector increased constantly, while manufacturing activity decreased, but at a slower pace than expected. The report also showed that the volumes of new businesses grow again after contracting for six consecutive months. However, companies cut jobs due to the increase in personnel costs after the increase in employers’ contribution to social security schemes.
- Last week, the BOE maintained stable interest rates at 4.25%, as expected, and maintained its gradual monetary expansion guide. The Central Bank of the United Kingdom also warned of higher energy prices and downward risks for the labor market.
- To obtain new clues about monetary policy perspectives, investors expect the testimony of the Governor of the BOE, Andrew Bailey, before the Economic Affairs Committee of the Lords and the speeches of the member of the Monetary Policy Committee (MPC) Megan Greene and the attached governor Dave Ramsden during the day.
- In the US region, the preliminary data of the PMI of the private sector for June were stronger than projected. The PMI of Services, which measures the activities in the service sector, was higher in 53.1, compared to the estimates of 52.9. The manufacturing PMI remained at 52.0, faster than the expectations of 51.0. According to the PMI report, the feeling of factories owners has increased in the hope of obtaining greater benefits of the new commercial policies imposed by President Trump.
- In the Monetary Front, a sudden change in the position of Federal Reserve officials (FED) on monetary policy perspectives has weighed on the yields of the US bonds and dollar. On Tuesday, the governor of the Fed, Michelle Bowman, joined Governor Christopher Waller and argued in favor of reducing interest rates as soon as in July.
- “[Estoy] Open to cut rates as soon as in the Julio Meeting of the FOMC if inflationary pressures remain contained, “said Bowman and warned about” emerging signs of weakness in the labor market. “On Friday, Christopher Waller said the Fed” should not wait for the labor market to collapse to cut rates. “
Technical Analysis: The sterling pound returns above the 20 -day Ema
The Esterlina Libra advances about 1,3600 against the US dollar on Tuesday and seeks to recover the maximum of three years of 1,3630 registered on June 13. The short -term trend of the GBP/USD pair becomes bullish as it returns above the 20 -day exponential (EMA) mobile average, which is around 1,3500.
The 14 -day relative force (RSI) index bounces about 60.00. A new bullish impulse would arise if the RSI exceeds that level.
Looking down, the minimum of May 16 around 1,3250 will act as a key support zone. On the positive side, the maximum of January 13, 2022 around 1,3750 will act as a 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.
