- The pound falls to less than 1.3500 against the US dollar before the US CPI data.
- Soft Employment Data in the UK paves the way to reduce the interest rate in England in August.
- It seems that the trade tensions between the United States and China have eased after a two -day meeting in London.
The pound (GBP) is trading to approximately 1.3480 against the US dollar (USD) during European trading hours on Wednesday. The GBP/USD pair is visited where the US dollar is circulated widely before the consumer price index data (USA) in the United States (CPI) for the month of May, which will be published at 12:30 GMT.
The US dollar index (DXY), which tracks the value of Greenback for six main currencies, rises slightly to nearly 99.15.
Investors will pay close attention to inflation data in the United States because it will affect the market expectations for FBI’s monetary policy expectations. It was also measured by the consumer price index, the main inflation is expected to increase to 2.5 % on an annual basis of 2.3 % in April. In the same period, the price of basic diameter prices – which exclude the prices of flying food and energy – will grow 2.9 %, faster than the previous 2.8 %. In the month, it is expected that both the main CPI and CPI will grow by 0.2 % and 0.3 %, respectively.
Signs of speeding prices will allow the Federal Reserve officials (Fed) to adhere to maintaining fixed interest rates until they get clear about the results of the customs tariff policy by US President Donald Trump after returning to the White House.
Even if inflation data is lower than expected, it is unlikely that policy makers at the Federal Reserve will support discounts in early interest rates, because they were referring to concerns about the inflation expectations of consumers under Donald Trump’s leadership.
On the Global Front, trade tensions between the United States and China were somewhat disposed of as the White House indicated a positive result of the two -day meetings between the representatives of trade in both countries detained in London. American Trade Minister Howard Lottenic expressed his confidence that both countries will respond to export restrictions.
Digest Market Mark: The pound sterling extends against its peers
- The pound extends to its negative side against its main peers on Wednesday, and extends the sale of the previous day. The British currency faces sharp pressure in the sale on Tuesday after the UK Office (UK) National Statistics (ON) informed a weak set of labor market data for three months until April.
- The data showed that the cracks arising in the labor market in the United Kingdom, as the decision of the Treasury Advisor Rachel Reeves to raise the contribution of employers to social security plans to 15 % of 13.8 %, entered into force in April.
- According to the report, the unemployment rate accelerated to 4.6 %, which is the highest level seen since July 2021. Also, the demand for employment slowed greatly, and wages have grown at a moderate pace.
- UK employment data in the United Kingdom increased the market expectations that the Bank of England (Bank Book) will reduce interest rates more than the investors expected earlier. “Weak functions and the growth of wages are slower and may lead to a balance in favor of the August reduction,” said HSBC analysts.
- Later this week, investors will focus on the monthly GDP in the United Kingdom and the factory data for April, which will be released on Thursday. The British economy is expected to reduce 0.1 % after expanding 0.2 % in March. In the month, it is expected that both manufacturing and industrial production data will contract again.
Technical Analysis: Correcting the pound to nearly 20 days from EMA
The sterling pound decreases to nearly 20 days of SIA moving average (EMA) at about 1.3467, indicating uncertainty in the near direction. GBP/USD pair of sale on Tuesday faced after failing to reconsider the highest level in three years at 1.3617.
The 24 -day relative index (RSI) is sharply located towards the 50 neutral level, indicating that the upscale capabilities were crowned.
On the upward trend, it will be the highest level in three years at 1.3617 main obstacles for the husband. Looking down, the lowest level on May 15 at 1.3258 will serve as a major support zone.
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.
