GBP/USD: Trading the British Public Sector Net Borrowing

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 The British Public Sector Net Borrowing measures the difference in income and spending by the UK government sector, including public companies. A reading which is higher than the market forecast is bearish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Tuesday at 8:30 GMT.

Indicator Background

Analysts monitor whether the public sector is running a surplus or deficit, and any readings which differ than the market expectations could be a cause for concern by investors and traders.

After an impressive surplus in February, the indicator posted a deficit of 12.9B in March, well above the market forecast of 5.6B. The markets are braced for further bad news, with a prediction this month of a ballooning deficit of 15.6B. Will the indicator surprise the markets with a better reading than the forecast?

Sentiments and levels

GBP/USD made one of its biggest moves of the year last week, climbing as high as the mid-1.61 level. What’s next for the pound? With higher inflation, not-so-bad unemployment and stronger consumer spending, the central bank could soon discuss hiking interest rates rather than adding to QE.

Technical levels, from top to bottom: 1.6474, 1.6356, 1.6265, 1.6132, 1.6065 ,1.60 and 1.5923.

5 Scenarios

  1. Within expectations: 12.0B to 19.0B: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 8.5B to 11.9B: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Below 8.5B: A reduction in public spending could prop up the GBP, and a second resistance line might be broken as a result.
  4. Below expectations: 19.1B to 22.5B: In such an outcome, GBP/USD could fall and break one level of support.
  5. Well below expectations: Above 22.5B: A sharp spike in public spending would be a source of concern for the markets. In this scenario, GBP/USD could break a second support level.

For more about the pound, see the GBP/USD forecast.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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