- The EUR/GBP seeks to take advantage of Friday’s rebound from the 0.8500 area.
- The hopes of a commercial agreement between the United Kingdom and the US favors the bulls of the GBP and could limit the crossing.
- Divergent policy expectations between the BOE and the ECB could act as an additional wind.
The EUR/GBP crossing attracts some buyers during the Asian session on Monday, although it lacks bullish conviction and remains close to a minimum of almost three weeks around the region of 0.8510 played on Friday. Cash prices currently quote just below the middle zone of 0.8500, with an increase of less than 0.10% in the day.
The lower relative performance of the pound sterling (GBP) in front of its European counterpart could be attributed to the comments of the United Kingdom finance minister, Rachel Reeves, who declared that the British government is not in a hurry to ensure a commercial agreement with the US. However, investors remain optimistic about the possibility that the United Kingdom reaches an agreement with the US.
In addition, the data published on Friday showed that retail sales of the United Kingdom unexpectedly increased 0.4% in March, after the growth reviewed from the previous month of 0.7%. This, together with the expectations that the Bank of England (BOE) will cut the interest rates more slowly than other important central banks, including the European Central Bank (ECB), should limit the losses of the GBP and capo the bullish potential for the EUR/GBP crossing.
The ECB warned earlier this month that economic growth will suffer a great blow to the US tariffs. And reinforced the case for a greater relief of politics in the coming months. This, in turn, justifies a certain caution before making new bullish bets around the EUR/GBP crossing and confirms that the recent corrective setback from the area of ​​0.8735-0.8740, or the highest level since November 2023 touched earlier this month, has come to an end.
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.
