- The Sterling book retracts against the US dollar at nearly 1,3,400 in front of a series of American economic data, including the version of the GDP in the first quarter.
- The American economy should have increased at a slight rate of 0.4% during the January-March period.
- Boe Greene expects Trump's pricing policy to be a clear disinflation for the economy.
The book Sterling (GBP) corrects almost 1,3400 compared to the US dollar (USD) during the European session on Wednesday from its new three -year summit of 1.3445 displayed on Tuesday. The GBP / USD pair drops slightly while the USD dollar (USD) checks in addition to a series of high-level economic data in the United States (United States), including the preliminary version of the preliminary gross domestic data (GDP) in the North American session.
The American Economic Analysis Bureau (BEA) should point out that the economy increased at a slower rate by 0.4% on a annualized basis, much lower than the previous reading of 2.4%. Economists have anticipated moderate GDP growth in the expectations of slowing down economic activity in the face of major prices imposed by US President Donald Trump earlier this month.
Trump’s additional prices on its business partners have increased in global economic uncertainty, including in the United States. Theoretically, Trump's protectionist policies should encourage national industry to accelerate their production to compensate for lower imports, but constantly evolving titles of the White House on import rights have forced them to suspend their expansion plans.
In addition, investors will focus on the first quarter of employment costs, ADP employment change data for April and data from the Personal Consumer Expenditure Price (PCE) for March. The employment cost index, which measures the total cost of employees for a company, should have increased regularly by 0.9%. In the US private sector, employers should have hired 108,000 fresh workers in April, much less than 155k in March.
Meanwhile, the basic data of the inflation of the PCE, which is the preferred inflation gauge of the Federal Reserve (Fed), should have increased by 2.6%, slower than the 2.8% increase observed in February.
The signs of assistance in employment growth and cooling of inflationary pressures would stimulate market expectations that the Fed could reduce interest rates at the June political meeting. According to the CME Fedwatch tool, there are 65% chance that the Central Bank will reduce interest rates in June. For the meeting of May's policy, traders are almost entirely prices in that the Fed will maintain the interest rates unchanged in the range of 4.25% to 4.50%.
FED officials said interest rates should stay at their current level until they have clarified how Donald Trump's new economic policies are shaping economic prospects. Trump on Tuesday again criticized the president of the Fed, Jerome Powell, for not having dropped interest rates, while commemorating his first 100 days in power. Trump did not mention Powell explicitly, but his comments and his records with him said.
“You are not supposed to criticize the Fed, you are supposed to let it do his own thing, but I know much more than him of interest rates, believe me,” said Trump.
Daily Digest Market Movers: Pound Sterling Trades is lower compared to his peers
- On Wednesday, the Sterling book underperforms its peers in European negotiation hours, merchants have become more and more confident than the Banque d'Engleterre (BOE) will reduce the interest rates of 25 base points (BPS) at its monetary policy meeting on May 8. Paris doe dois increased in the middle of the United Kingdom (United Kingdom).
- Decident Boe Megan Greene said that the potential trade war would be “clear disinflationist” for the British economy, in a discussion with the Atlantic Council's reflection group on Friday. Greene warned of shock waves on the job market in the face of an increase in employers' contribution to social security regimes at 15%, against 13.8%, which entered into force this month.
- Last week, the governor of the BOE, Andrew Bailey, underlined the need to consider the risk of trade war by the Central Bank. “We have to take the risk of growth very seriously,” said Bailey on the sidelines of spring Monetary Fund (IMF) in Washington.
- This week, the British economic calendar is not important to offer. Therefore, external forces would be the main engine of the British currency.
- The Sterling book remained supported against the US dollar in the midst of high uncertainty on the American-Chinese trade war. Washington wants China to launch commercial discussions with them, given its significant dependence on their exports to the United States. “I believe it is up to China to defuse, because they sell us five times more than we sell to them, Bessent said in an interview on the Squawk box of CNBC on Monday. Meanwhile, Beijing has promised to fight against the tariff war to protect its interests and dignity.
Technical analysis: Pound Sterling remains above all EMAS READ
The Sterling book is recovered at nearly 1,3,400 compared to the US dollar from the three years of 1.3445. However, the overall perspectives of the pair remain optimistic because all short to long to long exponential means (EMAS) are sloping above.
The relative resistance index of 14 days (RSI) bounces after having cooled at 60, currently at around 65, indicating a resurgence of the upward trend.
Uplining, the round level of 1,3600 will be a key obstacle for the pair. Looking down, on April 3, approximately 1,3,200 will serve as a major domain of support.
Pound Sterling Faqs
The pound sterling (GBP) is the oldest currency in the world (886 after JC) and the official currency of the United Kingdom. This is the fourth most negotiated unit for currencies (FX) in the world, representing 12% of all transactions, with an average of $ 630 billion per day, according to 2022 data. Its key 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 EUR / GBP (2%). The Sterling book is issued by the Bank of England (BOE).
The most important factor influencing the value of the pound sterling is the monetary policy decided by the Bank of England. The BOE bases its decisions on the question of whether it has achieved its main objective of “price stability” – a constant inflation rate of approximately 2%. Its main tool for achieving it is the adjustment of interest rates. When inflation is too high, the BO will try to curb it by increasing interest rates, which makes people more expensive for people and businesses to access credit. This is generally positive for GBP, because higher interest rates make the United Kingdom a more attractive place for global investors to park their money. When inflation falls too low, it is a sign that economic growth slows down. In this scenario, the BOE will plan to reduce interest rates to object to the credit so that companies will borrow more to invest in growth generating projects.
Data versions assess the health of the economy and can have an impact on the value of the pound sterling. Indicators such as GDP, Manufacturing and Services PMI and employment can all influence the management of the GBP. A strong economy is good for the pound sterling. Not only does it attract more foreign investment, but it can encourage BOE to establish interest rates, which will directly strengthen GBP. Otherwise, if the economic data is low, the pound sterling is likely to decrease.
Another important version of data for the Sterling book is the trade balance. This indicator measures the difference between what a country gains from its exports and what it spends in imports over a given period. If a country produces highly sought -after exports, its currency will only benefit from the additional demand created from foreign buyers seeking to buy these goods. Consequently, a positive net trade balance reinforces a currency and vice versa for a negative balance.
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