- The sterling pound exhibits fortress against the US dollar about 1,3300, since the weak US NFP data on Friday increased the Fed Dovish bets.
- The US economy added 73,000 new workers in July, below the estimates of 110,000.
- Investors expect the BOE to cut interest rates on Thursday.
The pound sterling (GBP) maintains Friday’s profits around 1,3300 against the US dollar (USD) during the European trading session on Monday. The GBP/USD torque shows strength while the US dollar (USD) is recovered after the sharp fall recorded on Friday after publication of non -agricultural payroll data (NFP) of the United States (USA) for July.
At the time of writing, the US dollar index (DXY), which tracks the value of the dollar against six main currencies, quotes about Friday’s minimum of around 98.60.
The US NFP report showed that labor market conditions have cooled significantly. According to the report, the economy created 73,000 new jobs, significantly below the expectations of 110,000. In addition, June and May employment figures were drastically reviewed. The unemployment rate accelerated to 4.2%, as expected, from the previous 4.1%.
The cooling of labor market conditions has raided the way to cut interest rate cuts by the Federal Reserve (FED) at the September monetary policy meeting. According to the CME Fedwatch tool, the probability that the FED cuts the interest rates next month has increased to 80.8% from 41.2% seen on Thursday, one day before the publication of the NFP data.
Meanwhile, the sudden resignation of the governor of the FED, Adriana Kugler, has also increased hopes that the Fed could resume its monetary flexibility cycle from September. Market experts believe that the decisions of the new governor appointed by US President Trump to replace Kugler will be biased towards his economic agenda.
“Kugler’s resignation allows the president to further mold the FOMC (Federal Committee of Open Market) to his image,” said analysts of Harris Financial Group, reports Reuters.
What moves the market today: the sterling pound will be influenced by the action of the BOE
- The sterling pound demonstrates a mixed performance in front of its main peers at the beginning of the week. Investors prepare for a volatile week for the British currency, since the Bank of England (BOE) is scheduled to announce its monetary policy decision on Thursday.
- The operators are almost totally valuing a reduction of interest rates of 25 basic points (PBS) by the BOE this week, according to a Reuters report. The BOE is expected to perform a delicate act of balance while guiding expectations on interest rates amid increasing price pressures and labor market conditions.
- The employment data for the three months that ended in May and the data of the Consumer Price Index (CPI) for June showed a slower hiring trend and an increase greater than expected in general and underlying inflation.
- This week, investors will also focus on the compound PMI data and S&P services for July, which are scheduled to be published on Tuesday. Preliminary estimates showed that the compound PMI was 51.0, noting that the economy grew at a moderate rate.
- On Tuesday, investors will also focus on the revised data of the Global S&P services PMI and the US ISM for July. The ISM services PMI is expected to rise to 51.5 from 50.8 in June.
- Meanwhile, the dismissal by the US President Trump of the Commissioner of the Office of Labor Statistics (BLS), Erika Mtntarfer, has generated doubts about the credibility of US data among investors. On Friday, Trump dismissed Mtientefer after the publication of the NFP report for “falsifying employment numbers.”
Technical Analysis: The sterling pound remains at a disadvantage despite the recovery against the US dollar
The sterling pound remains about 1,3300 against the US dollar on Monday. However, the perspective of the torque remains bassist, since the rupture of the graphic-cornered-hombro graphic pattern (H&S) remains intact and the 20-day mobile average (EMA) of 20 days is tilted down about 1,3400. The H&S pattern line is drawn around 1,3360.
The 14 -day relative force (RSI) index ranges below 40.00, almost reaching overall levels, indicating that the bearish momentum remains intact.
Looking down, the minimum of May 12, 1,3140 will act as a key support zone. On the positive side, the maximum of July 30 about 1,3385 will act as a key barrier.
LIBRA ESTERLINA – FREQUENTLY QUESTIONS
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.
