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British Pound (GBP) Latest: GBP/USD Price Consolidating Ahead of Budget

British Pound (GBP) Latest: GBP/USD Price Consolidating Ahead of Budget

2020-07-08 08:00:00
Martin Essex, MSTA, Analyst
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GBP price, news and analysis:

  • GBP/USD has broken above resistance at the psychologically-important 1.25 level.
  • Near-term, it could advance further if UK Chancellor of the Exchequer Rishi Sunak’s summer statement includes the expected fiscal measures to boost the UK economy.
  • The statement, described as a mini budget, is a response to the coronavirus pandemic and is due around 1230 UK time (1130 GMT).

GBP/USD well placed to rise after mini Budget

UK Chancellor of the Exchequer Rishi Sunak is due to unveil a series of fiscal measures to boost the UK economy in his summer statement due around 1230 UK time (1130 GMT). A raft of initiatives to be included in this so-called mini budget has already been announced and, if the statement lives up to its billing, could be bullish for GBP/USD.

GBP/USD Price Chart, One-Hour Timeframe (June 30 – July 8, 2020)

Latest GBP/USD price chart.

Chart by IG (You can click on it for a larger image)

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Ahead of the statement, GBP/USD seems finally to have broken convincingly above psychological resistance at the 1.25 level but there is a risk of a pullback if Sunak’s measures fail to live up to the expectations of a market that is more interested in economy-boosting ideas than the cost that will have to be faced in the future.

The mini budget will come as the stock markets generally consolidate after their recent gains amid concerns about a second wave of the coronavirus pandemic, with Melbourne returning to lockdown in Australia, South Florida in the US reversing course on reopening and Brazilian President Jair Bolsonaro testing positive for Covid-19. However, there has been little sign yet of a strong move into safe havens like the US Dollar and gold.

Sunak’s statement

In his statement, Sunak is expected to announce bonuses for firms offering job training for young people, a VAT cut for businesses, a National Insurance cut for employers, £500 spending vouchers for adults, a stamp duty holiday, green grants for householders and £1.6 billion for hard-hit live music venues and theatres.

While all these initiatives have essentially been pre-announced, and are therefore arguably already priced in, Sunak will likely pull a few other measures out of his hat that should at least ensure that GBP/USD remains above 1.25.

Looking for a guide to forex trading in London? Check out this article in our education section

We look at currencies regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

GBP/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -10% 1% -3%
Weekly 3% 10% 8%
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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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