- The Sterling pound increases to almost 1.2850 compared to the American dollar, because investors expect the US-China trade war, which will lead the US to recession.
- US President Trump increased mutual tariffs to China to 104% in relation to Beijing’s retaliation.
- Deutsche Bank expects Boe to lower interest rates by 50 BPS in May.
The Sterling pound (GBP) extends recovery from the previous day to almost 1.2850 compared to the American dollar (USD) in Wednesday’s European session. The GBP/USD couple is progressive because the American dollar is still in the face of sales pressure among the attachment of the expectations that the United States (USA) can take part in recession this year. The American dollar index (DXY), which follows the Greenback value compared to the six main currencies, drops to almost 102.00.
The modern escalation in the trade war between the USA and China caused the risk of recession in the USA. On Tuesday, US President Donald Trump signed an order to augment tariffs to China to 104%After the retaliation of Beijing, his mutual tariffs. Trump also blamed China for manipulation of currencies to balance the impact of higher duties.
Last week, China increased the US import fee by 34% in retaliation to similar mutual tariffs imposed by Trump on the day of liberation.
In addition, the acceleration of federal plants (FED) due to the growing risk of recession in the US also considered the American dollar. According to the CME Fedwatch tool, the probability of lowering the central bank interest rates in May increased to 52.5% from 10.6% registered a week ago.
To get more tips on the perspective of monetary policy, investors will focus on the minutes of the Federal Open Market Committee (FOMC) from a March policy meeting, which will be published at 19:00 GMT. At the political meeting, the FED left interest rates in the range of 4.25%-4.50%, and officials jointly maintained their guidelines for two interest rate reductions this year.
This week, investors will also focus on US consumer price indexes (CPI) in March, which will be issued on Thursday.
Daily Digest Market Movers: Punish Szterling remains on the tents
- The Sterling pound shows an unstable performance against the main peers on Wednesday. Investors are preparing for greater volatility because the protectionist policies of the US President Trump were a risk of global recession. Analysts from JPMorgan believe that rapid escalation with American tariffs on China is destructive enough to push the global economy into recession.
- China is known as the World Production Center, taking into account its competitive advantage in the scope of labor and support policy. Participants of the financial market are afraid that Chinese companies will look for other markets to sell their products if a trade war with American brews. Such a scenario will be unfavorable for Europe because it seems unable to fight the price war with China.
- In addition, traders collected Bank of England (Boe) factories among the fears that Trump’s tariff policy can send shock waves through the Economy of Great Britain (Great Britain). Analysts from Deutsche Bank expect that Boe may consider a more “strong” reaction to current economic conditions and provide a greater reduction in interest rates by 50 base points (BPS) at a May policy meeting. The Central Bank identified a significant decrease in survey rates, unjustified tightening of financial conditions and fear of slowing down the labor market as the key causes of the ultra-chowine Boe decision.
- This week, investors will focus on the monthly gross domestic product (GDP) and factory data for February, which will be issued on Friday. The economy of Great Britain is expected to augment by 0.1% after contracts at a similar pace in January.
Technical analysis: pound STERLING climbs above 1.2800
The pound of sterling increases above 1.2800 compared to the American dollar on Wednesday, but tries to recover a 20-day interpretation average (EMA), which trades around 1.2877.
The 14-day relative strength (RSI) indicator reflects after a decline to almost 40.00. Fresh Barish Momentum could be called if RSI does not maintain the level of 40.00.
Looking down, 38.2% Fibonacci’s recovery was deleted from the end of September to half of the counting near 1.2610, will be a key support zone for the couple. On the other hand, the psychological form of 1.3000 will act as a key resistance zone.
Pound sterling faq
The Sterling (GBP) pound is the oldest currency in the world (886 ne) and the official currency of Great Britain. According to data 2022, this is the fourth most rotating currency exchange unit (FX), which is 12% of all transactions, an average of $ 630 billion a day. Key commercial pairs are GBP/USD, also known as a “cable”, which is 11%FX, GBP/JPy or “Dragon”, as is known by traders (3%) and EUR/GBP (2%). The Sterling pound is published by Bank of England (Boe).
One most significant factor affecting the value of the pound of Szterling is the monetary policy undertaken by Bank of England. Boe bases his decisions whether he has achieved his main goal of “price stability” – a constant inflation rate of about 2%. Its main tool to achieve this is to adjust the interest rates. When the inflation is too high, Boe will try to restore it, raising interest rates, which makes him more steep for people and companies. This is generally positive for GBP, because higher interest rates make Great Britain a more attractive place for global investors to park their money. When inflation falls too low, it is a sign that economic growth slows down. In this scenario, Boe will consider reducing interest rates to a low-cost loan so that companies borrow more to invest in projects generating growth.
The data release the health of the economy and can affect the value of the pound of Szterling. Indicators such as GDP, PMI production and services and employment can affect the direction of GBP. A sturdy economy is good for sterling. It not only attracts more foreign investment, but can encourage Boe to set interest rates, which will directly strengthen GBP. Otherwise, if economic data is frail, the pound of sterling will probably fall.
Another significant issue of data for a pound of Szterling is a commercial balance. This indicator measures the difference between what the country earns on exports and what spends on imports in a given period. If the country produces a highly wanted export, its currency will benefit only from additional demand created by foreign buyers trying to buy these goods. Therefore, a positive net trade balance strengthens currency and vice versa for a negative balance.
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