- The EUR/GBP weakens around 0.8550 in the first European session on Wednesday.
- The moderate expectations of the ECB weigh on the common currency.
- USA will seek that the United Kingdom reduces its automotive tariff and relaxes the norms on agricultural imports.
The EUR/GBP crossing in negative territory about 0.8550 during the first European session on Wednesday. The moderate position of the European Central Bank (ECB) weighs on the euro (EUR) in front of the sterling pound. All looks will be placed in the preliminary readings of the APRIL PURCHASE MANAGING INDEX (PMI) of the United Kingdom and the Eurozone, which will be published later on Wednesday.
The increase in expectations that the ECB could cut interest rates again in the June policy meeting weighs on common currency. After those responsible for policies unanimously agreed to cut the reference rate in 25 basic points (PBS) at 2.25% last week, the president of the ECB, Christine Lagarde, said that the downward risks for economic growth have increased. According to LSE data, operators are now valuing almost 75% probability of a rate cut in June, compared to approximately 60% before the ECB decision.
Meanwhile, the person in charge of ECB policies, Francois Villerooy de Galhau, said on Tuesday that the commercial diatribes of US President Donald Trump affect economic growth, even for the US, and threaten to undermine financial stability.
As for the pound, positive developments around commercial conversations between the US and the United Kingdom provide some support for the GBP. The Wall Street Journal reported late Tuesday that the Trump administration is preparing its terms for commercial conversations with the United Kingdom, looking for London to reduce tariffs and other non -tariff barriers on a wide range of American products.
The US will seek that the United Kingdom reduces its automotive tariff from 10% to 2.5% and will also press the United Kingdom to relax the rules on US agricultural imports, including beef, and review the rules of origin for the products of each nation, according to people with knowledge. However, any sign of uncertainty in commercial policy could weigh on the GBP.
LIBRA ESTERLINA FAQS
The sterling pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most commercialized currency exchange unit (FX) in the world, representing 12% of all transactions, with an average of $ 630 billion a day, according to data from 2022. Its key commercial peers are GBP/USD, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The sterling pound is issued by the Bank of England (BOE).
The most important factor that influences the value of sterling pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions itself has achieved its main objective of “price stability”: a constant inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the Bank of England will try to control it by raising interest rates, which makes access to credit for people and companies more expensive. This is generally positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for global investors to invest their money. When inflation falls too much it is a sign that economic growth is slowing down. In this scenario, the Bank of England will consider lowering interest rates to reduce credit, so that companies will borrow more to invest in projects that generate growth.
Published data measure the health of the economy and can affect the value of sterling pound. Indicators such as GDP, manufacturing and services PMI and employment can influence the direction of the sterling pound.
Another important fact that is published and affects the pound sterling is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will benefit exclusively from the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
