GBP/USD Forecast: Pound Sterling turns bullish, eyes on UK budget

GBP/USD holds above 1.2700 after posting daily gains on Tuesday.
UK Chancellor Hunt is expected to announce tax cuts in Spring Budget.
Fed Chairman Powell will present the semi-annual Monetary Policy Report later in the day.

GBP/USD continues to edge higher and trades above 1.2700 after closing the third consecutive trading day in positive territory on Tuesday. The pair's near-term technical outlook points to a bullish tilt as investors await the UK budget and Federal Reserve (Fed) Chairman Jerome Powell's testimony.

UK Chancellor of the Exchequer Jeremy Hunt will present the Spring Budget on Wednesday. Hunt it expected to announce expansionary fiscal measures, including tax cuts.

Pound Sterling price today

The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the strongest against the Swiss Franc.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.16%	-0.15%	-0.06%	-0.24%	-0.19%	-0.17%	0.07%
EUR	0.16%		0.01%	0.11%	-0.07%	-0.02%	0.00%	0.24%
GBP	0.15%	0.00%		0.10%	-0.08%	-0.03%	-0.01%	0.23%
CAD	0.06%	-0.09%	-0.10%		-0.19%	-0.13%	-0.11%	0.13%
AUD	0.24%	0.10%	0.10%	0.18%		0.05%	0.07%	0.31%
JPY	0.20%	0.03%	0.03%	0.14%	-0.04%		0.03%	0.24%
NZD	0.16%	0.03%	0.02%	0.12%	-0.07%	-0.02%		0.32%
CHF	-0.07%	-0.23%	-0.22%	-0.13%	-0.31%	-0.25%	-0.23%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Although it's too early to say, expansionary measures could make the Bank of England's (BoE) job of taming inflation more difficult. Markets could see tax cuts as potentially being inflationary and start pricing in a delay in the BoE policy pivot, supporting the Pound Sterling.

Previewing the potential impact of the UK budget on Pound Sterling's valuation, "the reaction will certainly depend very much on the extent of the relief in the end. And, above all, whether the Bank of England is trusted to manage this higher spending. One thing is certain: an expansionary fiscal policy will likely make it more difficult for the BoE to bring inflation under control in the long run," said economists at Commerzbank. "Given the uncertainties, it is difficult to make an accurate forecast for the Pound."

Later in the day, February ADP Employment Change and January JOLTS Job Openings data will be featured in the US economic docket.

More importantly, Fed Chairman Powell will deliver the semi-annual Monetary Policy Report and respond to questions before the House Financial Services Committee.

In case Powell dismisses recent softening in macroeconomic data and adopts a more cautious tone regarding the inflation outlook, the USD could gather strength against its rivals. On the other hand, the USD is likely to continue to weaken if Powell confirms that June could be the right time for a policy pivot.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 60 and GBP/USD closed the last 4-hour candle above 1.2700. On the upside, resistance are located at 1.2760 (static level), 1.2800 (static level, psychological level) and 1.2830 (December 28 high).

In case GBP/USD returns below 1.2700 and starts using that level as resistance, technical sellers could take action. In this scenario, 1.2670 (50-period Simple Moving Average (SMA) on the 4-hour chart) could act as first support before 1.2650 (200-period SMA).

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