- The GBP/USD jumps above 1,3400 while the threat of US President Trump to dismiss Fed Powell has weakened the US dollar.
- Donald Trump criticizes Fed Powell for not reducing interest rates.
- This week, the sterling pound will be influenced by the PMI of S&P Global/CIPS and the retail sales data.
The GBP/USD PAR is recovered about 1,3400 during the European negotiation hours on Monday, the highest level seen in seven months. The cable is strengthened while the US dollar (USD) has been beaten by the threat to the independence of the Federal Reserve (FED) after the president of the United States (USA) Donald Trump.
The US dollar index (DXY), which follows the value of the dollar against six main currencies, has fallen more than 1% to a new minimum of three years about 98.00.
Donald Trump has criticized Fed Powell for continuing to support a “wait and see” approach in monetary policy until more clarity is obtained on how the new tariff policy will shape economic perspectives. Trump has expressed his dissatisfaction with Powell’s position on monetary policy perspectives and has indicated that he can dismiss him at any time.
The Fed really owes the American people to lower interest rates. That is the only thing for which it is good, “Trump said.” I’m not happy with him. If I want him to get out of there, he will leave very fast, believe me. “Trump said on Friday.
Meanwhile, commercial tensions due to the announcement of reciprocal tariffs by US President Donald Trump have kept the US dollar in a weak position during the last three months. Despite Trump’s announcement of a 90 -day break in the imposition of reciprocal encumbrances, uncertainty about global economic perspectives, including the US, remains intact.
In the United Kingdom (UK) region, the soft data of the March Consumer Price Index (CPI) and global uncertainty have raised the way for a cut of interest rates by the Bank of England (BOE) at the May Policy Meeting. Such scenario will be unfavorable for pound sterling (GBP).
In the Financial Policy Committee (FPC) of the current month, the BOE warned that an important change in the “global trade arrangements” could harm the “financial stability by depressing growth.”
This week, investors will focus on the preliminary data of the Purchase Management Index (PMI) of Global/CIPS S&P for April and retail sales data for March, which will be published on Wednesday and Friday.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
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.
