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GBP/USD pair stuck in narrow range amid US govt shutdown

Sterling continues to be largely driven by news headlines elsewhere, and has subsequently tracked the euro fairly closely in the past few weeks.

The GBP/USD pair has also been stuck in a fairly narrow range in the past fortnight, with the government shutdown across the Atlantic so far exerting very minimal selling pressure on the greenback.

This week is unusually light in terms of major macroeconomic and policy news out of Britain, in what feels to us like an eerie quiet before the storm.

Admittedly, there are still a fair few weeks to go until the Autumn Budget at the end of November, but speculation will be rife as to what could potentially be announced.

With Labour seemingly unable to agree upon spending cuts, and with rising debt and gilt yields severely limiting the ability of the government to increase borrowing again, further tax hikes are effectively a certainty. The only question remains as to who will pay the price.

Author

Matthew Ryan, CFA

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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