- The sterling pound faces offers against its main peers on Friday after the United Kingdom’s retail sales data fell faster than expected.
- Monthly retail sales collapsed 2.7%, faster than estimates of a 0.5%decrease.
- The BOE maintained stable interest rates in the monetary policy announcement on Thursday.
The sterling pound (GBP) faces selling pressure against its main peers on Friday after the publication of retail sales data of the United Kingdom (UK) for May, which were weaker than projected. The National Statistics Office (ONS) reported that retail sales, a key measure of consumer spending, fell 2.7% in the month. Economists expected the consumer spending measure to contract at a moderate rhythm of 0.5% after expanding 1.3% in April, upward revised from 1.2%.
Income retail sales unexpectedly fell 1.3%, while they anticipated that they grew 1.7%. A significant collapse in sales receipts in department stores and in clothing and footwear stores led to a strong fall in the figures.
The weak retail sales data of the United Kingdom often encourages traders to increase bets in favor of more interest rate cuts by the Bank of England (BOE). Traders expect the BOE to cut their key interest rates twice in the rest of the year after Thursday’s monetary policy announcement, in which the Central Bank kept them stable at 4.25%, as the consensus showed, with a 6-3 vote majority.
Three members of the Monetary Policy Committee (MPC) argued in favor of reducing interest rates again, citing that “a material loosening in labor market conditions” justifies greater relief in monetary policy.
The governor of the BOE, Andrew Bailey, maintained the guide of “gradual and careful monetary relief”, stating that interest rates remain in a “gradual descending path.” He warned that the weakening of labor market conditions and the increase in energy prices amid the growing tensions in the Middle East are key risks to the economy.
Looking ahead, the next trigger for the sterling pound will be the preliminary data of the purchasing managers index (PMI) S&P global/CIPS of the United Kingdom for June, which will be published on Monday.
What moves the market today: pound sterling against US dollar
- The sterling pound faces selling pressure after failing to break over the psychological level of 1,3500 against the US dollar (USD) on Friday, and the weak retail sales of the United Kingdom for May. The GBP/USD torque struggles to extend its recovery movement on Thursday and quotes around 1,3470 at the time of writing.
- The US dollar also quotes down, correcting sharply after comments from the White House that indicates that the US does not intend to attack Iran in the next few days, which raised the appetite for the risk of investors.
- The lack of immediate attack plans from Washington has also decreased the demand for shelter assets, sending the US dollar index (DXY) out of 98.60 from the weekly maximum of 99.15 registered on Thursday.
- “Based on the fact that there is a substantial possibility that the negotiations may or may not be carried out with Iran in the near future, I will make my decision on whether or not, within the next two weeks,” said press secretary Karoline Leavitt, said Ani News.
- The financial market participants anticipated that the US could join the Israel Defense Forces (IDF) and accelerate air attacks on Iran, with the aim of preventing Tehran from building nuclear eyes. The fears of a direct US attack arose after a Bloomberg report on Wednesday that indicated that senior US officials are preparing for the possibility of an attack on Iran in the coming days. The news increased the demand for shelter assets, such as the US dollar.
- On Wednesday, new projections of the Federal Reserve (FED) that will cut interest rates less times in 2026 and 2027 of the anticipated in March also supported the US dollar. According to the Fed points graph, the policy formulators collectively reviewed the interest rate objective for 2026 and 2027 to 3.6% and 3.4%, respectively. At the policy meeting, the Fed held the stable interest rates in the range of 4.25% -4.50% per fourth consecutive meeting and warned of upward risks for inflation.
- To obtain new clues about inflation perspectives, investors will focus on the preliminary data of the US PMI S&P of the USA for June, which are scheduled to be published on Monday. The PMI report will show the change in prices paid by business owners for supplies and sales prices in the imposition of tariff policy by US President Donald Trump.
Technical analysis: indecision before weekly closure
The sterling pound faces barricades around the psychological level of 1,3500 against the US dollar, which coincides with the 20 -day exponential (EMA) mobile average, suggesting that the short -term trend is uncertain.
The 14 -day relative force index (RSI) falls about 50.00, indicating a lateral performance in the short term.
Looking down, the minimum of May 16 around 1,3250 will act as a key support zone. On the positive side, the maximum of three years around 1,3630 will act as a key barrier.
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.
