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- GBP/USD is back below the 1.2675 area after the Bank of England kept interest rates steady.
- The Bank of England’s vote split remains unchanged at seven to two.
- Weak US data eroded market sentiment, boosting the dollar.
The GBP/USD pair fell on Thursday after the Bank of England (BoE) held firm. Rates At 5.25%, indicating continuing concerns about the central bank’s ability to sustainably keep inflation at or below the 2.0% target level. US data was broadly weaker than investors expected in early US trading, sparking a mild wave of risk aversion that kept US dollar and British pound supply steady at the lower end.
Read more: The Bank of England keeps interest rates at 5.25% as expected
The Bank of England was widely expected to keep interest rates unchanged in June, but the focus on recent services inflation coupled with the ambiguous target of keeping inflation “sustainably” low has left sterling in the lurch. In addition, the Bank of England He also cited a desire to keep policy as restrictive as long as possible, and stressed that the UK labor market, although more flexible than previously, was still historically tight. The British pound fell about a third of a percent against the extended US dollar as market action continued on Thursday.
Initial jobless claims in the US exceeded the mark, coming in higher than expected for the week ending June 14. Unemployment claims on a weekly basis were still lower, at 238,000 versus the previous 243,000 (revised from 242,000), but still higher than 242,000. The four-week trading average was 242.75K, which was also up from the previous average of 227.25K.
Philadelphia Nourish it The June manufacturing survey fell to 1.3 from the previous 4.5, completely missing expectations of 5.0. US housing starts also fell, falling to 1.277 million new residential construction projects from the previous month in May versus expectations of 1.37 million and 1.352 million in the previous month (revised from 1.36 million).
Friday will end the sterling trading week on a strong note, with UK retail sales and a fresh update to global Purchasing Managers’ Index (S&P) numbers for both the UK and US. United kingdom Retail It is expected to rebound to 1.5% m/m in May compared to the previous decline of -2.3%, while UK PMIs are expected to rise slightly. The manufacturing PMI is expected to rise to 51.3 from 51.2, and the services component is expected to rise to 53.0 from 52.9.
On the US side, the manufacturing and services PMIs are both Climate prediction The manufacturing index is expected to fall to 51.0 from 51.3 and the services index to fall to 53.7 from 54.8.
Technical forecast for GBP/USD
Pound The British pound fell back below the 1.2700 level against the US dollar on Thursday, losing weight and falling in the race back to near-term lows of 1.2657. Technicians favor a bearish extension as the 200-hourly Exponential Moving Average (EMA) price action fluctuates at 1.2721, with further declines if a bullish bounce is not eliminated all together.
Daily candles are consolidating bearish rejection from the supply zone above the 1.2800 handle, and dips head back to the 200 day EMA high across 1.2580. Technical support is weakening from the 50-day moving average at 1.2674, and a full bearish push would drag GBP/USD to 2024 lows at 1.2300.
GBP/USD hourly chart
GBP/USD daily chart
Questions and answers about the pound sterling
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 popular foreign exchange (FX) trading unit in the world, accounting for 12% of all transactions, averaging $630 billion per day, according to 2022 data. Its main trading pairs are GBP/USD, also known as “Cable”. , which represents 11% of foreign currencies, GBP/JPY, or “the dragon” as traders know it (3%), and EUR/GBP (2%). . The pound sterling is issued by the Bank of England (BoE).
The single most important factor affecting the value of the pound sterling is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on whether it has achieved its primary objective of “price stability” – a stable inflation rate of around 2%. The primary tool for achieving this is adjusting interest rates. When inflation is too high, the Bank of England will try to rein it in by raising interest rates, making it more expensive for individuals and businesses to obtain credit. This is generally positive for the pound, as higher interest rates make the UK a more attractive place for global investors to put their money. When inflation falls to a very low level, it is a sign that economic growth is slowing. In this scenario, the Bank of England would consider lowering interest rates to reduce the cost of credit so that companies borrow more to invest in growth-generating projects.
Data releases measure the health of the economy and can affect the value of the British pound. Indicators such as GDP, manufacturing PMIs, services and employment can all influence the direction of the pound. A strong economy is good for the pound. Not only does it attract more foreign investment, but it may encourage the Bank of England to raise interest rates, which will directly strengthen sterling. Otherwise, if economic data is weak, the British pound is likely to fall.
Another important data release for the British Pound is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a certain period. If a country produces highly sought-after exports, its currency will take full advantage of the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
