GBP/USD rebounds from 1.2150 as USD Index refreshes monthly low, UK Fiscal Budget eyed
|- GBP/USD has continued to oscillate in the 50-pip range as investors await the UK budget for fresh impetus.
- The USD Index has printed a fresh monthly low at 104.33 as the odds of bigger rates announcement by the Fed have faded.
- UK’s tax-free pension allowances would favor less early retirement.
The GBP/USD pair has managed to defend its cushion around 1.2150 in the Asian session. The Cable is inside the woods, auctioning in a range of 1.2150-1.2200 for the past two trading sessions. A sheer volatility is expected from the cable as United Kingdom Finance Minister (FM) will announce the fiscal budget for CY2023.
The UK economy has operated under the clouds of uncertainty in the past year due to double-digit inflation, shortage of labor, supply chain bottlenecks, a pile-up of debt, political instability, and subdued activity. Therefore, a promising budget is expected from UK Hunt ahead.
Financial Times reported that UK FM is expected to raise UK tax-free pension allowances to discourage early retirement. The UK economy has been facing an extreme shortage of labor, which has been a major factor behind the double-digit inflation figure. Therefore, the tax-free pension allowances will also the working labor force to make more savings than usual and they might avoid early retirement.
Apart from them, discussions on energy support and the declaration of investment zones will be major agendas in the financial budget.
Meanwhile, the recording of fresh monthly lows by the US Dollar Index (DXY) has also provided a cushion to the Cable. The USD Index has printed a fresh monthly low at 104.33 as the odds of bigger rates announcement by the Federal Reserve (Fed) have faded. S&P500 futures have recovered early morning losses, portraying a significant improvement in the risk appetite of the market participants.
For further guidance, the United States Retail Sales data will be keenly watched. Monthly Retail Sales data is expected to contract by 0.3% vs. the former release of 3% expansion. This indicates that resilience in consumer spending is easing and the Fed is on track of achieving the 2% inflation target.
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