- GBP/USD can fight due to the threats of new tariffs from US President Donald Trump.
- The latest FOMC meeting report has stressed the need for more time to assess multiple factors before considering any price amendments.
- The British pound has struggled to obtain strength despite the most powerful annual inflation rate.
GBP/USD holds the ground after registering the losses in the previous two days, as it hovers about 1.2590 during the Asian session on Thursday. However, the husband faces pressure as concerns about the customs tariff by US President Donald Trump provided support to the US dollar (USD). Trump confirmed that a 25 % tariff on drug imports and conductors will enter April. In addition, he emphasized that the car tariff will remain 25 %, which escalates global trade tensions.
Market participants are now focusing on the main US economic data, including the unemployed demands, the economic pioneering CB index, and the Philly Fed manufacturing index, which will be issued during the North American session.
The FOOC Open Market Committee (FOMC) confirmed the minutes of the January Policy meeting, which was published on Wednesday, again, the decision to maintain interest rates unchanged in January. Politics makers emphasized the need for more time to assess economic activity, labor market trends and inflation before considering any amendments to a price. The committee also agreed that clear signs of low inflation are necessary before the price cuts are carried out.
Despite the most powerful annual inflation rate expected on Wednesday, the pound sterling (GBP) failed to get traction. The UK National Statistics Office (ONS) reported that the Consumer Prices Index (CPI) in January increased by 3.0 % on an annual basis, exceeding an increase in December 2.5 % and market expectations by 2.8 %. This figure is still much higher than the goal of inflation in the Bank of England (BOE) by 2 %.
England bank policymakers have acknowledged that inflation may rise in the short term due to the high energy prices before returning gradually to the target level. England governor Andrew Billy reiterated earlier this week that although inflation may rise temporarily, he does not expect to be fixed and still sees a gradual direction of inflation.
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 of foreign unit (FX) in the world, as it represents 12 % of all transactions, with an average of 630 billion dollars a 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 is known by merchants (3 %), and EUR/GBP (2 GBP (2 %). The pound sterling 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.
