British Pound (GBP) Latest: GBP/USD to Remain Stable, No Response to UK Budget
GBP price, news and analysis:
- GBP/USD continues to trade just under the 1.40 level, as it has since early Friday, and shows no sign yet of breaking either higher or lower near-term.
- There was nothing in Wednesday’s set-piece UK Budget, or the accompanying economic forecasts, to affect it one way or the other.
- Traders need to keep an eye out for rising Gilt yields, however, as they could begin to increase concerns about inflation and a possible response from the Bank of England.
GBP/USD stability to persist near-term
Wednesday’s UK Budget and the accompanying forecasts by the independent Office for Budget Responsibility, a set-piece political event, came and passed Wednesday with nothing in it to affect the British Pound. GBP/USD therefore remains in the narrow range it has traded in since Friday last week, with no sign yet of a breakout either up or down.
However, traders need to keep an eye out for rising government bond yields around the world, as the debt markets respond to fears that a global economic recovery from the slump caused by the coronavirus pandemic will lead to higher inflation and a hawkish response from central banks – including the Bank of England.
The rise in UK sovereign bond (Gilt) yields can be seen in the daily chart below.
UK 10-Year Gilt Yield Chart, Daily Timeframe (December 9, 2020 – March 4, 2021)
Source: Investing.com (You can click on it for a larger image)
For now, though, GBP/USD remains just below the psychologically-important 1.40 level, between resistance at 1.4182, the February 25 high, and support at 1.3859, the low touched on March 2.
GBP/USD Price Chart, Hourly Timeframe (February 25 – March 4, 2021)
Source: IG (You can click on it for a larger image)
It’s worth noting that if both US Treasury yields and UK Gilt yields rise in tandem that should have no impact on GBP/USD. However, the pair could still be buffeted by comments from Federal Reserve and Bank of England policymakers as traders weigh up whether one central bank is more hawkish than the other.
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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.