- GBP/USD is advanced with a weak US dollar amid low US yield.
- The basic inflation in the United States increased to 3.6 % yearly in January, which exceeds 3.3 % expected but slightly less than 3.7 % revised.
- UK gross domestic product expanded by 1.4 % on an annual basis in the fourth quarter of 2024, exceeding 1.1 % market expectations.
GBP/USD remains a fixed 1.2560 during the Asian hours on Friday after gains in the previous session. The couple was appreciating as US President Donald Trump delayed the implementation of mutual definitions. In addition, the US dollar (USD) weakens the United States falling into the curve, despite the ongoing concerns about a global trade war.
The US dollar index (DXY), which measures the value of the US dollar against six major currencies, extends its losses in the fourth consecutive session. DXY trades about 107.00 with two years and 10 years return on US Treasury bonds that are 4.31 % and 4.53 %, respectively, at the time of this report.
The inflation of the basic product price index in the United States (the United States) increased to 3.6 % year on year in January, which exceeds 3.3 % expected but just less than 3.7 % revised (previously reported by 3.5 %). These expectations have strengthened that the Federal Reserve (Fed) will delay the cuts until the second half of the year. In addition, strong inflation can constantly support the expectations carried by the Federal Reserve to maintain interest rates by 4.25 % -4.50 % for a long time.
Investors are now turning their attention to the upcoming US retail sales data, which is the main economic release of this week. The markets expect a slight contraction of -0.1 % in monthly retail sales, after an increase of 0.4 % previous.
In the UK (UK), data showed on Thursday that the economy grew by 1.4 % on an annual basis in the last quarter of initial estimates. This represents the fastest growth of GDP since Q4 2022. During the full 2024, the British economy expanded 0.9 %, an increase of 0.4 % in 2023, driven by an increase of 1.3 % in the services sector, compared to 0.4 % growth in the previous year.
Stering questions and answers to the pound
The British pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most trading of foreign unit (FX) in the world, as it represents 12 % of all transactions, with an average of 630 billion dollars a day, according to 2022 data. Their main trading pairs are GBP/USD, also known as “Cable”, Which represents 11 % of FX, GBP/JPY, or “dragon” as is known by merchants (3 %), and EUR/GBP (2 GBP (2 %). The pound sterling was released by the Bank of England (Bank of England).
The only most important factor that affects the value of the British pound is the monetary policy decided by the Bank of England. The Bank of England is based on its decisions on whether it has achieved its primary goal of “stability in prices” – a fixed inflation rate of about 2 %. Its primary performance to achieve this is to adjust interest rates. When inflation is very high, the Bank of England will try to make interest by raising interest rates, making it more expensive for people and companies to reach credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to stop their money. When inflation decreases significantly, economic growth slows down. In this scenario, the Bank of England will consider reducing interest rates to licensing credit so that companies borrow more to invest in growth generation projects.
Data affects the health of the economy and can affect the value of the pound sterling. Indicators such as gross domestic product, manufacturing, services, and employment can affect the GBP direction. The strong economy is useful for sterling. Not only attracts more foreign investments, but it may encourage the Bank of England to set interest rates, which will enhance the GBP directly. Otherwise, if the economic data is weak, it is possible that the pound sterling will fall.
Issuing another important data for the British pound is the balance of trade. This indicator measures the difference between what a country gains from its exports and what it spends on imports during a certain period. If a country produces very desirable exports, its currency will benefit from the additional demand resulting from foreign buyers who seek to buy these goods. Therefore, the positive and positive trade balance enhances the currency and vice versa to achieve a negative balance.
