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  • Jeremy Hunt unveiled a budget on Thursday that included several tax rises.
  • The British economy is already in recession and will continue to decline in 2023.
  • Fed’s James Bullard stated that US interest rates needed to increase by at least one full percentage point.

Today’s GBP/USD price analysis is bullish as Hunt tries to fix UK’s finances. The British finance minister, Jeremy Hunt, unveiled a budget on Thursday that included several tax rises and tougher restrictions on public spending.

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Hunt stated that the economy was already in a recession and was expected to continue to decrease in 2023. The pound fell sharply against the dollar, though this was mainly a result of the dollar’s strength relative to other major currencies.

Hunt presented a 55 billion GBP plan to repair the public finances and said the economy was already in a recession and would continue to contract in 2023 due to inflation.

Late in September, after Hunt’s predecessor Kwasi Kwarteng unveiled a budget plan that would have added billions to the government’s borrowing costs, the pound touched a record low against the dollar. Since then, the pound has recovered significantly as the dollar has declined globally amid expectations that the United States Federal Reserve will soon stop raising interest rates as US inflation slows.

However, complicating this story, St. Louis Federal Reserve President James Bullard stated on Thursday that there was a good chance that interest rates still needed to increase by at least one full percentage point.

“Don’t blame Hunt for lower sterling. It’s dollar buying,” said Kenneth Broux, senior FX and rates strategist at Societe Generale.

GBP/USD key events today

Investors will pay attention to retail sales data from the United Kingdom and existing home sales data from the United States.

GBP/USD technical price analysis: Bulls prepare to retest the 1.2007 resistance

GBP/USD price analysis

Looking at the 4-hour chart, we see the price trading above the 30-SMA and the RSI above 50, showing bulls are in charge. After failing to break above the 1.2007 resistance level, the price pulled back and retested the 1.1751 support and the 30-SMA.

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At the moment, bulls have come back and are pushing the price off the SMA. If bulls can maintain their strength, the price will likely retest the 1.2007 resistance and possibly break above. However, if bears return, they might reverse the trend by pushing the price below 30-SMA.

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