- The sterling pound falls about 1,3400 against the US dollar as the US reaches a commercial agreement with the EU.
- Investors expect the Fed to maintain stable interest rates on Wednesday.
- The BOE is expected to cut interest rates next week.
The sterling pound (GBP) falls about 1,3400 against the US dollar (USD) at the beginning of the week. The GBP/USD pair descends as the US dollar attracts offers after the announcement of a commercial framework between the United States (USA) and the European Union (EU).
The US dollar index (DXY), which follows the value of the dollar against six main currencies, rises to about 97.90 at the time of writing.
During the weekend, US President Donald Trump announced a commercial agreement with the EU, which states that base tariffs on Brussels imports will be 15%, half of what Trump threatened in the middle of the month.
The tariff agreement between the US and the EU has led to an acute increase in the demand for risky assets. However, risk -sensitive currencies fight to capitalize on market optimism, since the agreement has also improved the prospects for the US dollar.
The confirmation of the commercial agreement between both economies on both sides of the Atlantic has undermined the uncertainty around the deadline of tariffs on August 1, which maintained a brake on the rise in the US dollar. The confirmation of the US Commercial Pact.
Meanwhile, investors expect commercial conversations between the US and China in Stockholm to discuss the tariff truce, which will begin on Monday. According to the South China Morning Post (SCMP), it is expected that Washington and Beijing will extend their tariff truce for 90 days, which will expire on August 12.
What moves the market today: the sterling pound will be influenced by the expectations of interest rates of the BOE
- The sterling pound shows a mixed performance in front of its peers during the European negotiation session on Monday. The British currency is expected to be influenced by market speculation about the monetary policy decision of the Bank of England (BOE) next week due to a light economic calendar in the United Kingdom (UK).
- The operators have completely incorporated a reduction of 25 basic points (PBS) in the interest rates by the BOE in the monetary policy announcement of August 7 due to the cooling conditions in the labor market.
- A slowdown in the United Kingdom labor market has been observed in the latest employment data due to an increase in employers’ contributions to social security schemes. In the last Autumn Declaration, the Treasury Chancellor Rachel Reeves, increased the contribution of employers in the National Insurance (NI) to 15% from 13.8%.
- Last week, the preliminary report of the Purchase Managers Index (PMI) of the United Kingdom Global S&P for July also pointed out that personnel numbers decreased to the fastest rate since February.
- In the global field, the Federal Reserve Monetary Policy announcement (FED) on Wednesday will significantly influence the GBP/USD. According to the CME Fedwatch tool, Fed is expected to maintain interest rates without changes in the range of 4.25%-4.50%.
- Since it is widely anticipated that the FED maintains stable interest rates, investors will closely follow the comments of President Jerome Powell on the impact of tariffs on short and long -term inflation, as well as possible monetary policy actions in the rest of the year.
Technical Analysis: The sterling pound falls about 1,3400
The sterling pound extends its fall to about 1,3400 against the US dollar on Monday. The GBP/USD torque slides as its short -term trend remains bassist, since it is quoted below the exponential mobile socks (EMA) of 20 days and 50 days, which are located around 1,3505 and 1,3474, respectively.
The formation of a graphic and shoulder graphic pattern (H&S) in the daily temporal frame also suggests that the perspectives for the cable are bassists. The collar line of the H&S graphic pattern is drawn about 1,3413.
The 14 -day relative force (RSI) index descends to about 40.00. A new downward movement would arise if the RSI breaks below that level.
Looking down, the minimum of May 12, 1,3140 will act as a key support zone. On the positive side, the maximum of July 1 around 1,3790 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.
