GBPUSD Forecast: Pound Sterling regains poise after UK budget
- GBPUSD has gathered bullish momentum and climbed above 1.1900.
- The technical outlook suggests that buyers are looking to control the pair's action.
- UK's Hunt announced £55 billion in tax rises and spending cuts.
Following a sharp decline with the initial reaction to the UK's Autumn Budget, GBPUSD has regained its traction and climbed above 1.1900. The technical outlook shows that the bullish bias stays intact in the short term and that the pair could look to test 1.2000.
On Thursday, British Chancellor Jeremy Hunt announced that they will be introducing a total of £55 billion in tax rises and spending cuts in the Autumn Budget. "Today’s statement delivers a consolidation of £55 billion and means inflation and interest rates end up significantly lower," Hunt added.
It is difficult to assess whether the UK's fiscal policy will allow the Bank of England (BOE) to adopt a less-aggressive policy-tightening approach. Nevertheless, the negative impact of the budget on the Pound Sterling faded away quickly, suggesting that investors are yet to decide how the fiscal policy will influence the monetary policy.
In the second half of the day, October Existing Home Sales data from the US will be looked upon for fresh impetus. Markets expect a 0.1% contraction and a bigger-than-forecast decline could weigh on the US Dollar and help GBPUSD stretch higher.
Meanwhile, US stock index futures moved into positive territory after having edged lower during the Asian session, pointing to an improving market mood. In case risk flows start to dominate the financial markets ahead of the weekend, GPBUSD could end the week on a strong footing and vice versa.
GBPUSD Technical Analysis
GBPUSD has returned within the ascending regression channel and closed the last three four-hour candles above the 20-period Simple Moving Average, highlighting the bullish bias.
On the upside, initial resistance is located at 1.1950 (static level) ahead of 1.2000 (psychological level) and 1.2030 (November 15 high).
On the other hand, a four-hour close below 1.1900 (static level, psychological level, 20-period SMA)) could open the door for an extended downward correction toward 1.1850 (static level) and 1.1800 (psychological level, static level).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
