- The GBP/USD weakened while the US dollar was driven by a more optimistic tone of the US president Donald Trump.
- The president of the United States Donald Trump helped to calm the markets by clarifying that he has no intention of dismissing the president of the Fed, Jerome Powell.
- The sterling pound faces difficulties due to the caution of investors on the monetary policy perspectives of the Bank of England.
The GBP/USD extended its losses during Wednesday’s Asian session, quoting around 1,3300 after going back a maximum of seven months of 1,3424 registered in the previous session. The torque weakened as the appetite of investors moved back to US assets, including the US dollar (USD), driven by a more optimistic tone of the US president Donald Trump.
President Trump helped relieve market concerns by affirming his support for the president of the Federal Reserve (Fed), Jerome Powell, stating: “The press echoes things. No, I have no intention of saying goodbye. I would like to see it a little more active in terms of its idea of lowering interest rates.”
Further improving the feeling, US Treasury Secretary, Scott Besent, described the ongoing commercial conflict with China as “unsustainable” and expressed confidence in solving it. Although formal negotiations have not yet begun, Besent supposedly told attendees in a private event by JP Morgan Chase & Co. in Washington that an agreement could be attainable soon.
Trump reinforced this optimism, highlighting progress in commercial conversations with China. Although he dismissed the possibility of pronounced tariffs increases – claiming that tariffs would not rise to 145% – he also declared that existing tariffs would remain in force for the moment.
Meanwhile, the sterling pound (GBP) remains under pressure as investors become more cautious about the monetary policy perspectives of the Bank of England (BOE), particularly in the light of international commercial tensions promoted by the Trump administration. Speculation is increasing that the BOE could choose to cut interest rates in its Mayo Policy meeting due to continuous global economic uncertainty.
Adding pressure, the United Kingdom’s commercial relationship with the US is in flow after the Trump administration imposed 10% reciprocal tariffs and 25% levies on steel and foreign cars. While a commercial agreement remains possible, the current dynamics weigh on the feeling of 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.
