Pound Sterling bounces back against US Dollar as market sentiment improves
- The Pound Sterling recovers strongly to near 1.3255 against the US Dollar as the market mood turns favorable for risk-perceived assets.
- Improving market sentiment has diminished the US Dollar’s safe-haven demand.
- Iran acknowledges receiving the US proposal, but seems reluctant to open the Hormuz in exchange for a temporary ceasefire.
The Pound Sterling attracts significant bids against the US Dollar (USD) on Monday, rising 0.45% to near 1.3255 during the European trading session. The major currency pair gains as the risk-on impulse strengthens, following comments from Iran that it is reviewing the United States (US) ceasefire proposal.
The market sentiment turning favorable for riskier assets has diminished the appeal of safe-haven assets. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is down 0.35% to near 99.85. The DXY traded marginally higher in the Asian trade.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.33% | -0.39% | -0.16% | -0.18% | -0.54% | -0.55% | -0.32% | |
| EUR | 0.33% | -0.05% | 0.15% | 0.16% | -0.23% | -0.25% | -0.01% | |
| GBP | 0.39% | 0.05% | 0.19% | 0.18% | -0.17% | -0.21% | 0.05% | |
| JPY | 0.16% | -0.15% | -0.19% | -0.00% | -0.39% | -0.41% | -0.17% | |
| CAD | 0.18% | -0.16% | -0.18% | 0.00% | -0.36% | -0.39% | -0.15% | |
| AUD | 0.54% | 0.23% | 0.17% | 0.39% | 0.36% | -0.03% | 0.22% | |
| NZD | 0.55% | 0.25% | 0.21% | 0.41% | 0.39% | 0.03% | 0.26% | |
| CHF | 0.32% | 0.01% | -0.05% | 0.17% | 0.15% | -0.22% | -0.26% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In the European session, Iran said that it has received the ceasefire proposal through Pakistan, but clarifies that Tehran won’t accept anything under deadlines or pressure, and dismissed the reopening of the Strait of Hormuz in return for a “temporary ceasefire”.
Earlier, a Reuters report claimed that both nations are discussing a two-tier deal that involves plans to end hostilities by Monday.
On the domestic front, investors seek fresh cues about whether the Bank of England (BoE) will raise interest rates in upcoming policy meetings amid the ongoing war in the Middle East.
Last week, BoE Governor Andrew Bailey said, while speaking with Reuters, that monetary policy actions from the United Kingdom (UK) central bank would be desirable if an oil price shock turns out to be a pivotal element. "We will have to act if appropriate but tackling source of energy price shock is most important," Bailey said. He warned that prolonged energy shocks could act as a major drag on economic growth.
In the US, investors await the ISM Services PMI data for March, which will be published at 14:00 GMT. Economists expect the Services PMI to arrive lower at 55.0 from 56.1 in February.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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