GBP/JPY decreases to the lowest level in two weeks less than 196.00 on political tensions in the United Kingdom
- GBP/JPY remains under strong selling pressure and trading less than 196.00 on Wednesday.
- The United Kingdom weighs a doctrine weighing the pound sterling.
- UK Prime Minister Kiir Starmer reaffirmed that Finance Minister Rachel Reeves will remain in office.
The British pound remains under heavy sale on Wednesday, as markets establish the latest political developments in the United Kingdom. At the time of the press, GBP/JPY was trading at its lowest level in two weeks near 195.50, and lost 0.8 % on a daily basis.
British Finance Minister Rachel Reeves seemed clearly annoyed during the PMQS on Wednesday after Prime Minister Kiir refused to ensure that she will remain on her platform until the upcoming elections. This development has sparked a sale in the UK government bonds, as the return on the reference increased for 10 years by more than 4 % a day to its highest level since June.
Although Starmer’s press secretary later said Reeves has full support for the Prime Minister, Markets greatly ignored this comment. “The counselor does not go anywhere, and she has the support of the full prime minister,” the press secretary told reporters.
This reflects the twice of GBP widely, the last time was seen at the euros/GBP rising by about 1 % per day from 0.8650, while GBP/USD decreased by more than 1 % near 1.3600.
Stering questions and answers to the pound
The British pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most trading for foreign unit (FX) in the world, as it represents 12 % of all transactions, with an average of 630 billion dollars per day, according to 2022 data. Their main trading pairs are GBP/USD, also known as “Cable”, which represents 11 % of FX, GBP/JPY, or “dragon” as it is known by merchants (3 %), and, and EUR/GBP (2 %). The pound was released by the Bank of England (Bank of England).
The only most important factor that affects the value of the British pound is the monetary policy decided by the Bank of England. The Bank of England is based on its decisions on whether it has achieved its primary goal of “stability in prices” – a fixed inflation rate of about 2 %. Its primary performance to achieve this is to adjust interest rates. When inflation is very high, the Bank of England will try to make interest by raising interest rates, making it more expensive for people and companies to reach credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to stop their money. When inflation decreases significantly, economic growth slows down. In this scenario, the Bank of England will consider reducing interest rates to licensing credit so that companies borrow more to invest in growth generation projects.
Data affects the health of the economy and can affect the value of the pound sterling. Indicators such as gross domestic product, manufacturing, services, and employment can affect the GBP direction. The strong economy is useful for sterling. Not only attracts more foreign investments, but it may encourage the Bank of England to set interest rates, which will enhance the GBP directly. Otherwise, if the economic data is weak, it is possible that the pound sterling will fall.
Issuing another important data for the British pound is the balance of trade. This indicator measures the difference between what a country gains from its exports and what it spends on imports during a certain period. If a country produces very desirable exports, its currency will benefit from the additional demand resulting from foreign buyers who seek to buy these goods. Therefore, the positive and positive trade balance enhances the currency and vice versa to achieve a negative balance.
