- GBP/USD has extended its sideways grind below 1.2200 on Wednesday.
- UK Chancellor Hunt will unveil budget in Parliament around 1230 GMT.
- The near-term technical outlook suggests that bullish bias stays intact.
Following the three-day rally, GBP/USD staged a technical correction and registered small losses on Tuesday. Early Wednesday, the pair has been moving in a relatively tight range below 1.2200 as investors await the UK budget announcements.
After the data from the US showed that the Core Consumer Price Index (CPI) rose by 0.5% in February, compared to the market expectation and January reading of 0.4%, the US Dollar managed to keep its footing. Investors started to price in a 25 basis points Federal Reserve rate hike at next week's meeting and US Treasury bond yields rebound following the sharp decline that was triggered by the collapse of Silicon Valley Bank.
Meanwhile, Britain has extended its support for household energy prices by three months, to the end of June, keeping in place a price cap that will see average annual bills stay at £2,500. This development could suggest that households will have more disposable income during that period, which could be inflationary in the short term.
British Finance Minister (Chancellor) Jeremy Hunt is expected to unveil the budget in Parliament around 1230 GMT on Wednesday. Hunt will reportedly introduce additional child-care support, worth around £4 billion, and investment in skills training.
The impact of soft UK wage inflation data on the pricing of the Bank of England's (BoE) next rate decision seems to have faded already. According to Reuters, the probability of a 25 bps rate increase at the next BoE meeting has increased to 70% from around 40% on Tuesday.
In the second half of the day, February Retail Sales and Producer Price Index data will be featured in the US economic docket. Although a stronger-than-expected monthly Core PPI, at or above 0.5%, could help the US Dollar hold its ground, the market reaction is likely to remain short-lived. Instead, market participants will keep a close eye on the US Treasury bond yields and the performance of Wall Street's main indexes.
Another bout of risk rally in the American session should hurt the USD and vice versa.
GBP/USD Technical Analysis
GBP/USD seems to have formed a short-term trading channel between 1.2140 and 1.2200. The Relative Strength Index (RSI) indicator on the four-hour chart holds comfortably above 50, suggesting that sellers remain uninterested for the time being.
On the upside, a four-hour close above 1.2200 (static level, psychological level) could bring in additional buyers and open the door for an extended rally toward 1.2260 (static level) and 1.2300.
Below 1.2140, 1.2100 (psychological level, static level) aligns as next support before 1.2075 (200-period SMA) and 1.2040 (100-day SMA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.