GBP/USD Outlook: GBP Rallies as Sunak Consider Delaying Budget Plan

• Rishi Sunak might delay the release of the UK’s budget plan.
• UK’s new Prime Minister has restored the country’s fiscal credibility.
• The pound is soaring as the dollar weakens across the board.

Today’s GBP/USD outlook is bullish. Wednesday saw the pound reaching six-week highs as Rishi Sunak, the new prime minister of Britain, met with his cabinet for the first time amid rumors that he could postpone the release of a plan to fix the nation’s public finances.

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James Cleverly, the foreign minister, suggested on Wednesday that the government’s fiscal plan, slated for October 31 and eagerly anticipated by markets, might be postponed because more time might be required to explain the specifics.

“Things are certainly starting to look a lot more constructive for the pound,” said Michael Brown, head of market intelligence at Caxton.

“PM Sunak coming into office appears to have restored fiscal credibility with the market, removing a large chunk of the risk premium previously associated with UK assets,” said Brown.

Liz Truss, the former prime minister, resigned last week after making significant changes to her fiscal plan, which had caused havoc on the UK gilt markets. The pound plunged to a historic low of $1.0327 against the dollar on September 26.

Although the currency has rebounded roughly 13% since then, it is still down 14% this year compared to the dollar. According to Caxton’s Brown, the pound should remain supported for the time being due to a general softness in the dollar as the market anticipates a more dovish Federal Reserve next week.

GBP/USD key events today

Investors will be watching data releases from the US, such as the report on initial jobless claims, the GDP for Q3, and the core durable goods orders.

GBP/USD technical outlook: Pause in the uptrend around the 1.1600 psychological level

Looking at the 4-hour chart, we see the price trading above the 30-SMA and the RSI far above 50. The price is trading steeply, making higher highs and higher lows. Bulls have a lot of momentum, as seen in the RSI, trading close to the overbought region.

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The price started making small-bodied candles around the 1.1601 level, which signified exhaustion. Bears have taken advantage of this weakness to lower the price and might retest the 1.1495 key level. However, the bullish bias remains as long as the price trades above the 30-SMA.

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