- The sterling pound demonstrates strength around 1,3550 against the US dollar while the dollar suffers from the disappointing US economic data for May.
- Uncertainty about tariffs weighs even more about the US dollar, since the US president Trump raised tariffs on steel and 50% aluminum on Wednesday.
- Bailey del Boe reiterated a gradual and cautious monetary expansion approach.
The pound sterling (GBP) exhibits fortress above 1,3550 against the US dollar (USD) during Thursday’s European negotiation hours. The GBP/USD torque signs firmly while the US dollar struggles to gain ground after a strong mass sale on Wednesday. The USD suffers due to a series of disappointing economic data from the United States (USA) for May following the tariff policy imposed by President Donald Trump after his return to the White House.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, fights about six weeks around 98.60 registered on Tuesday.
On Wednesday, the US employment change report in the US showed that the private sector hired 37K new workers, surprisingly less than April 60k and well below the 115K market expectation. This was the lowest reading since January 2021, which generates concerns about the stability of the labor market.
In addition, an unexpected decrease in the activity of the services sector caused the risk of economic contraction, since the services sector represents two thirds of the total economic activity in the US this week, the ISM manufacturing PMI report also showed that the activity of the manufacturing sector decreased to a faster rate.
The general contraction in business activity reflects the consequences of tariff uncertainty promoted by the constant statements of President Trump. The “stop and follow” ads about Washington’s tariff policy have forced national manufacturers to stop their strategic developments and expansion plans.
This week, Donald Trump doubled import tariffs on steel and 50%aluminum, with the aim of boosting the production of national steel. However, market experts have warned that this could lead to an increase in inflation, a movement that would discourage the Federal Reserve (Fed) to reduce interest rates.
On Wednesday, President Trump reiterated his criticism of the Fed after the publication of the poor employment data of ADP in a public publication for not lowering interest rates. “ADP number outside !!!” Too late “Powell must now lower the rate. It’s amazing! Europe has dropped nine times!” Trump wrote.
What moves the market today: sterling pound stabilizes while Bailey of the BOE reaffirms a gradual approach to monetary relaxation
- The sterling pound shows strength against its main peers on Thursday in a week of light economic calendar in the United Kingdom (United Kingdom). The main triggers for the British currency in the remaining week will be market expectations about the monetary policy of the Bank of England (BOE) and commercial discussions between the US and China.
- This month, the BOE is unlikely to lower interest rates, given the increase in inflationary pressures and stable conditions of the labor market. Meanwhile, the governor of the BOE, Andrew Bailey, reaffirms an “gradual and careful” monetary expansion approach in the midst of uncertainty on the global economic front.
- Andrew Bailey said to the Treasury Committee of Parliament on Tuesday: “I think the road is still down, but how far and how fast it is now wrapped in much more uncertainty,” Reuters said.
- Uncertainty about trade negotiations between Washington and Beijing is also expected to keep the United Kingdom economy under pressure. Since China enjoys a low -cost competitive advantage worldwide, the United Kingdom’s business owners would face the pressure of a price war in the international market if the two largest nations in the world fail to close a commercial agreement.
- On Wednesday, President Trump pointed out in a publication in Truth Social that it is difficult to reach an agreement with Chinese leader Xi Jinping. “I like President XI of China, I always liked it and I will always do it, but it is very hard and extremely difficult to make an agreement with him !!!”, Trump wrote. However, market experts are slightly optimistic about the US and China close a commercial agreement, since Trump’s publication indicated that it has begun direct conversations with President XI.
- This week, US NFP data will be a key trigger for the GBP/USD torque, which will be published on Friday.
Technical analysis: The sterling pound ranges around 1,3550
The sterling pound is round trip around 1,3550 against the US dollar on Thursday after an upward movement the day before. The GBP/USD torque maintains the key horizontal support drawn from the maximum of September 26, 1,3434. The perspective for the torque remains firm since the 20 -day exponential mobile average (EMA) is inclined to rise around 1,3443.
The 14 -day relative force index indicator (RSI) is maintained above 60.00, suggesting that the bullish impulse remains intact.
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 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.
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