Pound Sterling gains against US Dollar as focus shifts to US-China trade talks
- The Pound Sterling moves higher against the US Dollar ahead of trade talks between the US and China.
- Investors await the UK Employment and monthly GDP data later this week.
- US President Trump criticizes the Fed for not lowering interest rates after US NFP data showed underlying weakness.
The Pound Sterling (GBP) rises to near 1.3570 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair gains as the US Dollar underperforms across the board amid uncertainty ahead of trade talks between the United States (US) and China in London later in the day. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, corrects to near 99.00 after a decent upside move on Friday.
Both Washington and Beijing have confirmed that their delegates will negotiate trade terms. The announcement arrived at a time when the US is grappling with some cracks in the labor market, and the Chinese economy is facing deflation.
On Friday, the US Nonfarm Payrolls (NFP) report for May showed that the cumulative jobs added in March and April were 95K lower than previously reported. However, the number of job seekers recruited in May came in at 139K, slightly higher than expectations of 130K. Earlier on Monday, the National Bureau of Statistics of China reported that the prices of goods and services, as measured by the Consumer Price Index (CPI), deflated steadily by 0.1% year-on-year in May.
US President Donald Trump has expressed confidence in a post on Truth Social over the weekend, stating that trade discussions between negotiators from both nations would go smoothly. “I am pleased to announce that Secretary of the Treasury Bessent, Secretary of Commerce Lutnick, and US Trade Representative, Ambassador Greer, will be meeting in London on Monday, June 9, 2025, with Representatives of China, with reference to the Trade Deal. The meeting should go very well,” Trump wrote.
Technically, the announcement of US-China trade talks should have had a positive impact on the US Dollar. However, the currency is down as market experts believe that sentiment will remain fragile until a meaningful outcome is seen. Analysts at Saxo Markets said, "A deal to keep talking might be better than nothing, but unless we see a concrete breakthrough, the impact on sentiment is likely to remain muted,” Reuters reported.
Daily digest market movers: Pound Sterling rises ahead of UK Employment data
- The Pound Sterling trades higher against its major peers at the start of a United Kingdom (UK) economic data-packed week. Investors will pay close attention to the UK employment data for the three months ending April and the monthly Gross Domestic Product (GDP) data for April, which are scheduled to be released on Tuesday and Thursday, respectively.
- The labor market data is expected to show that the ILO Unemployment Rate accelerated to 4.6%, the highest level seen since July 2021. A higher jobless rate could prompt market expectations that the Bank of England (BoE) would cut interest rates again sooner.
- In the upcoming monetary policy announcement on June 19, the BoE is almost certain to hold interest rates steady at 4.25%. Faster-than-expected growth in the UK Consumer Price Index (CPI) data for April is the dominant reason behind traders remaining confident about the BoE leaving borrowing rates unchanged this month.
- On Friday, BoE Monetary Policy Committee (MPC) member Megan Greene warned in a conference in Croatia that the recent increase in price pressures could prove to be persistent, given her recent experience with inflation. "The last time we had a lot of second-round effects. We’re hoping that we won’t have second-round effects this time around, but we’re not sanguine about it."
- On Tuesday, investors will also focus on Average Earnings data, a key measure of wage growth that drives inflation in the services sector. Average Earnings, both Excluding and Including bonuses, are expected to have risen almost steadily by 5.5% on a yearly basis.
- In the US, investors will focus on the US Consumer Price Index (CPI) data for May, which will be released on Wednesday. The CPI report is expected to show that inflationary pressures grew at a faster pace, a scenario that will discourage Federal Reserve (Fed) officials from supporting interest rate cuts in the near term.
- Meanwhile, US President Trump has criticized the Fed again for not lowering interest rates. “Too late at the Fed is a disaster! Europe has had 10 rate cuts, we have had none. Despite him, our Country is doing great. Go for a full point, Rocket Fuel!, Trump wrote on Truth Social after the release of the US NFP report.
Technical Analysis: Pound Sterling climbs to near 1.3570
The Pound Sterling jumps to near 1.3570 against the US Dollar on Monday, aiming to revisit the three-year high of 1.3617 reached on June 5. The outlook for the pair remains firm as the 20-day Exponential Moving Average (EMA) slopes higher around 1.3464.
The 14-day Relative Strength Index (RSI) holds above 60.00, suggesting that the bullish momentum is intact.
On the upside, the January 13, 2022, high of 1.3750 will be the key hurdle for the pair. Looking down, the horizontal line plotted from the September 26 high of 1.3434 will act as a key support zone.
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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