- The sterling pound advances in front of its main peers since the inflation of the United Kingdom grew at a stronger pace than expected in April.
- The United Kingdom Services CPI accelerated to 5.4% from 4.7% in March.
- Moody’s’s reduction to the US credit rating keeps the US dollar at a disadvantage.
The sterling pound (GBP) attracts offers compared to its main peers on Wednesday, reaching a new three years about 1,3470 against the US dollar (USD). The British currency extends its profits after the publication of consumer price index (CPI) of the United Kingdom for April, an important trigger that will discourage the Bank of England (BOE) to support an additional expansive monetary policy stance.
As measured by the CPI, the general inflation of the United Kingdom increased to a robust rate of 3.5% year -on -year, compared to estimates of 3.3% and the March reading of 2.6%. This is the highest level seen since November 2023. In the same period, the underlying IPC – which excludes volatile food, energy, alcohol and tobacco components – grew by 3.8%, faster than expectations of 3.6%and the previous publication of 3.4%. Intermensual general inflation strongly increased 1.2%, compared to estimates of 1.1%and the previous reading of 0.3%.
The United Kingdom National Statistics Office (ONS) reported a remarkable increase in housing prices and domestic services, transport and recreation and culture, which led to a strong increase in inflationary pressures.
Inflation in the services sector, which is closely followed by BOE officials, accelerated 5.4% from 4.7% in March. The increasing inflationary pressures are expected to force those responsible for the BOE policy to eliminate their orientation of “gradual and cautious” monetary expansion “of their next policy announcement, which is scheduled for June, and will press operators to reduce Dovish bets.
“I am disappointed with inflation figures,” said Treasury Chancellor Rachel Reeves.
On Tuesday, the chief economist of the BOE, Huw Pill, warned about caution in interest rate cuts due to the “potential inflationary impact of structural changes in the behavior of pricing and salary fixation, after the experience of prolonged inflation and well above the objective in recent years,” Bloomberg said.
What moves the market today: the sterling pound renews its maximum of three years against the US dollar
- The Libra Esterlina publishes a new maximum of three years around 1,3470 against the US dollar during the European negotiation hours on Wednesday after the publication of the Hot Report of the United Kingdom IPC. Another reason behind the pure force in the GBP/USD torque is the substantial weakness in the US dollar following the mood’s reduction to the sovereign credit rating of the United States (US legislators to support the fiscal bill.
- The US dollar index (DXY), which tracks the value of the dollar against six main currencies, falls to about 99.45, the lowest level seen in two weeks.
- The reduction of a Moody’s step in the long -term transmitter rating of the US to AA1 from AAA, which occurred due to the growing fiscal imbalances and an increase in interest obligations for the US administration due to a debt of 36 billion dollars, continues to hit the US dollar. In addition, the fears of a greater increase in the country’s debt load, with the new Trump fiscal bill that seeks to increase the responsibility of the administration by 3 to 5 billion dollars, are also harming the credibility of the US dollar.
- On Tuesday, Republican legislators disseminated in supporting the new fiscal bill, citing that seeks to increase the limits in deductions for state and local tax payments, according to Republican representative Mike Lawler, Reuters reported. Meanwhile, the Democrats said that the bill would lead cracks in social programs and favor the rich. These comments from the Democrats seemed to arise following the restriction of Medicaid’s norms in the tax bill.
- Meanwhile, Fed officials have warned about stagflation due to the repercussions of President Trump’s new economic policies. Those responsible for the policy have argued in favor of maintaining interest rates at their current levels, since tariffs could lead to an abrupt increase in inflation.
Technical analysis: the pound sterling jumps above 1,3450
The sterling pound rises to about 1,3470 against the US dollar on Wednesday, the highest level seen in more than three years. The general trend of the GBP/USD torque was already bullish, since all long -term exponential mobile socks (EMA) are inclined to rise.
The 14 -day relative force index (RSI) breaks above 60.00, suggesting a new bullish impulse if the RSI remains above that level.
On the positive side, the maximum of January 13, 2022 of 1,3750 will be a key obstacle to the pair. Looking down, the 20 -day EMA about 1,3300 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.
