This week, there has been a significant regain in the British pound’s value. This recent recovery is not surprising because the financial markets have bounced back after the turmoil caused by the banking crisis in the United States.
Talking of the European market, the GBP/EUR pair has also seen momentum in its price. At press time the pair was trading at around 1.2119.
Major Financial Institutions to Rescue
Money markets this week have remained buzzing. The financial markets across the globe collapsed due to the U.S. banking sector crisis.
The crisis came after the demise of SVB. As the result, Switzerland’s second-largest bank has also seen a decline in its share value.
On the flip side, if we look at the U.S. market, the share price of First Republic Bank touched rock bottom.
Overall, in total 18 U.S banks have seen a massive decline in their prices.
The larger banks in the United States quickly took action out of concern that the spread of the contagion would affect smaller banks.
In such a situation, some of the biggest banks in the U.S. entered the market to give the banking sector much-needed momentum.
Bank of America and Goldman Sachs and a few other banks have decided to give the banking sector aid of $30 billion.
The unprecedented rescue plan has given hope to jittery markets. Amid this recovery, plan investors are hoping that the crisis will be resolved soon.
The Federal Reserve and the United States government are closely monitoring the situation with great anticipation.
Moreover, the recent change in the Federal Reserve’s decision regarding the interest rate hike has resulted in a weak dollar. Hence, the GBP has gained momentum against the U.S.D, and its price rose higher.
The Fed holds the key meeting on 22nd March, in which they will review the overall market conditions before making the final decision on the interest rate increase.
Recently, multiple reports have claimed either the Fed will increase the interest rate by 25 bps or let it remain the same.
But after the big banks entered the market to rescue the market, this has once more increased the possibility of an interest rate hike by 75 bps. But price restructuring is coming after the Feds meetings.
Despite All the Market Bubbles GBP Gained the Momentum
The United Kingdom received positive news regarding inflation as the expectations of inflation decreased from 4.8% in January to 3.9% in February.
As things stand inflation is at its 5-month low. The current inflation is at a 10.1% clip. The decline in anticipation of inflation may indicate that inflation is on track to return to single-digit levels.
Technically speaking, the GBP/USD in the Asian trading round saw the level of resistance at around 1.2164. Moving forward the next level of resistance is expected to reach 1.2294.
Currently, the chances are very strong for GBP to go higher. By the end of this quarter, it is anticipated that the value of the British Pound will be 1.18.
In addition to that, The Bank of England is likely to increase the interest rate by 25 bps. This would lead to a further rise in the price of GBP. As things stand it is wise for investors to invest in GBP.
The British pound is already on its way to achieving stability. So, things are going well for GBP after two to three poor years.
The current strong movements from GBP are also signs that market bulls are very active in terms of sending the price of GBP upward.
But how long this price will remain upgraded no one can predict. But experts are hopeful that right now GBP can stay stronger for the long period.
So, if you are the one looking to invest in the money market, go for Great British Pound. On the Flipside, the Japanese Yen and Euro have also gained momentum in terms of price.