- The sterling pound remains in profits about 1,3300 against the US dollar while the dollar suffers after the weak US inflation data for April.
- The US General CPI grew 2.3%, the lowest level in more than four years.
- Investors expect the preliminary data of the United Kingdom GDP of the first quarter scheduled for Thursday to obtain more clues about the health of the economy.
The sterling pound (GBP) firmly quotes around 1,3300 against the US dollar (USD) in the European session on Wednesday, near Tuesday’s maximum. The GBP/USD pair clings to the profits while the US dollar goes back after the publication of the US consumer price index (CPI) for April, which turned out to be softer than expected, on Tuesday.
The general inflation of the United States fell to 2.3% year -on -year, the lowest level since February 2021. The underlying IPC – which excludes volatile food and energy prices – constantly grew by 2.8%, as expected. In monthly terms, both the general and underlying CPI grew at a slower rate of 0.2%.
Technically, the cooling signals of inflationary pressures should lead operators to support the bets of an interest rate cut by the Federal Reserve (Fed). However, the market expectations that the Fed maintain stable interest rates at the July meeting have not diverted a centimeter of the levels seen on Monday, one day before the publication of US inflation data.
According to the CME Fedwatch tool, the probability that the Fed maintain interest rates in the current range of 4.25%-4.50%in July remained stable at 61.4%. However, it has increased significantly from 29.8% seen last week after the US and China announced a substantial reduction of tariffs.
Investors have taken the agreement with China as a favorable event for the economic perspectives of the US, forcing them to delay the expectations of trimming of interest rates and compensating for the effects of the decrease in inflation. Meanwhile, the US president, Donald Trump, continues to support the need for feature cuts, strengthening his argument following the fall in significant goods prices.
“Without inflation, and the prices of gasoline, energy, edible and practically everything else, are going down! The Fed must lower the rate, as Europe and China have done!” Trump said in Truth Social. Trump criticized the president of the Fed, Jerome Powell, for not lowering interest rates: “What happens to Too Late Powell? It is not fair for America, which is ready to bloom. Just let everything happen, it will be something beautiful!” Trump added.
What moves the market today: the pound sterling is stable in a quiet day for the markets
- The sterling pound is quietly in front of its main peers on Wednesday while investors reassess market expectations about the monetary policy of the Bank of England (BOE) for the rest of the year after the publication of labor market data for the three months that ended in March on Tuesday.
- The data showed lower employment growth, a higher unemployment rate and slower salary growth. It seems that companies have lightened their hiring process before an increase in employers’ contributions to social security schemes that entered into force in April.
- Meanwhile, moderate growth in average profit data is expected to provide relief to BOE officials. Policies responsible pay special attention to salary growth data, since they are a main factor behind inflation in the services sector, a key factor behind persistent price pressures in the United Kingdom.
- Despite the growing hope of cooling of price pressures, the chief economist of the BOE, Huw Pill, warned on Tuesday that inflation could continue to be stronger than expected, which could strengthen the need to maintain the highest interest rates. “I’m still concerned that we have seen a kind of structural change in the behavior of pricing and salaries, perhaps driven by the type of things that were involved in the models of the inflationary process of the 70s and 80s,” Pill said at a conference at the London School of Economics, Reuters reported.
- Looking ahead, the main trigger for the sterling pound will be the preliminary data of the United Kingdom’s GDP of the first quarter and factor data, which will be published on Thursday. The economy of the United Kingdom is expected to expand 0.6% in the first quarter of the year, faster than the growth of 0.1% seen in the last quarter of 2024.
Technical Analysis: The sterling pound clings to profits about 1,3300
The sterling pound remains in profits around 1,3300 against the US dollar on Wednesday. The GBP/USD pair returns above the 20 -day exponential (EMA) mobile average, which quotes around 1,3255, which suggests that the trend has become bullish again.
The 14-day relative force (RSI) index oscillates within 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.
