- The sterling pound rises after the surprisingly encouraging retail sales of the United Kingdom for February.
- The United Kingdom’s economy expanded at a robust rate of 1.5% in the last quarter of 2024.
- Investors prepare for the imminent tariffs of US President Trump.
The sterling pound (GBP) recovers the intradic nominal losses and becomes positive about 1,2960 against the US dollar (USD) in the American session on Friday. The GBP/USD pair advances after the publication of the data of the United States Personal Consumption Expenditure Index (USA) for February.
The underlying inflation of the PCE in the US – which excludes volatile food and energy prices – grew at a faster rate of 2.8% year -on -year, coinciding with the forecast of the Federal Reserve (Fed) provided at the December meeting. Economists expected the underlying inflation data to have accelerated 2.7% compared to the 2.6% increase observed in January. The underlying inflation of the Intermenual PCE increased 0.4%, faster than the expectations and the previous publication of 0.3%.
A growth higher than expected in the underlying inflation data of the PCE in the US. According to the CME Fedwatch tool, the Central Bank is almost certain that it will maintain stable interest rates in the current range of 4.25% -4.50% at the May policy meeting, but there is 8% probability that you can cut them in June.
What moves the market today: the sterling pound remains flat against the US dollar before the US PCE inflation.
- The sterling pound exceeds its peers, except the US dollar and the Japanese yen (JPY), on Friday after the publication of retail sales data of the United Kingdom (UK) for February and the revised figures of the Gross Domestic Product (GDP) of the fourth quarter. The Office of National Statistics (ONS) reported that retail sales, a key measure of consumer spending, surprisingly increased by 1% intermennsual. Economists expected the data to have decreased 0.3%. In January, retail sales grew at a robust rate of 1.4%, decreased down from 1.7%.
- In the 12 months until February, the measure of consumer spending grew strongly 2.2% compared to 0.5% estimates and the previous 0.6% publication, decreased down from 1%. Retail sales data is expected to support the officials of the Bank of England (BOE), who guided a “gradual and cautious” monetary relaxation perspective “at the policy meeting last week after maintaining interest rates without changes in 4.5%.
- Meanwhile, the revised GDP figures show that the economy expanded at a faster rate of 1.5% compared to the preliminary estimate of 1.4%.
- This week, the Treasury Chancellor of the United Kingdom, Rachel Reeves, presented a budget update in which she announced a significant cut in social benefits and reduced her GDP forecasts to half for the current year to 1%. Reeves added that the amendments in social spending would save 4.8 billion pounds, and that he would rebuild a fiscal mattress of almost 10 billion pounds.
- In the geopolitical front, investors prepare for the imminent reciprocal tariffs of US President Donald Trump, who are expected to force market experts to review their consumer inflation expectations. However, Fed officials and financial market participants had already anticipated that tariffs would be inflationary for the US and the global economy, respectively, in the short term. Even so, they need clarity about tariff rates to know the degree of acceleration in price pressures.
- President Trump is ready to announce reciprocal tariffs on April 2, the same day that his recent 25% tax on cars will be implemented. Meanwhile, the Prime Minister of the United Kingdom, Keir Starmer, seeks to ensure an agreement with the US before Trump reveals reciprocal tariffs. “Commercial wars are not good for anyone,” said Foreign Minister Rachel Reeves in an interview with Bloomberg Television on Thursday and added that these next days are working intensely to try to ensure “a good agreement for Britain.”
- Market participants also expect the impact of Trump’s tariffs to be very limited in the United Kingdom. At the end of February, Trump commented that he is not sure about the imposition of tariffs on the United Kingdom and sounded confident that an agreement could be reached, since Keir Starmer was “very friendly.”
Technical Analysis: The sterling pound maintains the 20 -day EMA key
On Friday, the sterling pound strives to maintain the fibonacci setback of 61.8%, drawn from the maximum of the end of September to the minimum of mid -January, about 1,2930 against the US dollar. The 20 -day exponential (EMA) mobile average continues to provide a support for around 1,2885.
The 14 -day relative force index (RSI) cools about 60.00 after having been overcomplicated above 70.00. A new bullish impulse should arise if the RSI resumes its ascending path after staying above the level of 60.00.
Looking down, the 50% fibonacci setback in 1,2770 and the 38.2% fibonacci setback in 1,2615 will act as key support areas for the torque. On the positive side, the maximum of October 15, 1,3100 will act as a key resistance zone.
FAQS inflation
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is often expressed as an intermennsual and interannual percentage variation. The underlying inflation excludes more volatile elements, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. The underlying inflation is the figure on which economists focus and is the objective level of central banks, which have the mandate of maintaining inflation at a manageable level, usually around 2%.
The consumer price index (CPI) measures the variation in the prices of a basket of goods and services over a period of time. It is usually expressed as an intermennsual and interannual variation. The underlying IPC is the objective of the central banks, since it excludes the volatility of food and fuels. When the underlying IPC exceeds 2%, interest rates usually rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite occurs when inflation falls.
Although it may seem contrary to intuition, high inflation in a country highlights the value of its currency and vice versa in the case of lower inflation. This is because the Central Bank will normally raise interest rates to combat the greatest inflation, which attracts more world capital tickets of investors looking for a lucrative place to park their money.
Formerly, gold was the asset that investors resorted to high inflation because it preserved their value, and although investors often continue to buy gold due to their refuge properties in times of extreme agitation in the markets, this is not the case most of the time. This is because when inflation is high, central banks upload interest rates to combat it. Higher interest rates are negative for gold because they increase the opportunity cost to keep gold in front of an asset that earns interest or place money in a cash deposit account. On the contrary, lower inflation tends to be positive for gold, since it reduces interest rates, making bright metal a more viable investment alternative.
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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.
