British Pound (GBP) Latest: GBP/USD Rally Persists, UK Spending Review in Focus
GBP price, Spending Review, Brexit news and analysis:
- GBP/USD continues to challenge resistance around the 1.34 level as analysts wait for UK Chancellor of the Exchequer Rishi Sunak’s spending review and the accompanying economic and fiscal forecasts.
- Brexit remains a key factor too as BRINO – Brexit in Name Only – becomes one of the more likely outcomes of the talks between the EU and the UK on their relationship from next year onwards.
GBP/USD uptrend set to continue
GBP/USD continues to edge towards resistance at the 1.34 level, with a sustained break higher looking increasingly likely. The main event in the UK Thursday is a spending review – essentially a mini budget – due to begin between 12:30 and 12:45 GMT after Prime Minister Boris Johnson answers questions in Parliament.
The review itself seems unlikely to move the markets, with UK Chancellor of the Exchequer Rishi Sunak expected to announce a squeeze on public sector pay outside the health sector, although he has ruled out a return to austerity. Arguably more important will be the accompanying forecasts for the economy and the public finances from the independent Office for Budget Responsibility.
GBP/USD Price Chart, One-Hour Timeframe (November 12-25, 2020)
Chart by IG (You can click on it for a larger image)
Brexit bare-bones deal still likely
Looking further ahead, the talks between the EU and the UK on their relationship after the Brexit transition period ends on December 31 will be a major factor. At present, BRINO – Brexit in name only – is one of the more likely outcomes. Note though that while any deal would likely boost the British Pound it could also attract some profit-taking after the currency’s recent advance.
More generally, market optimism could give Sterling a lift as sentiment is boosted by rising hopes of a smooth transition from Donald Trump’s presidency to President Elect Joe Biden’s team. Coronavirus vaccine hopes and ample central bank liquidity are also positive for the currency, as is the naming of Janet Yellen as the next US Treasury Secretary.
The former head of the US Federal Reserve would likely work hand-in-glove with the current Fed chair Jay Powell and her appointment is also seen as making a fiscal stimulus program more likely.
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--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.