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GBP/USD Maintains Losses After Budget Statement

GBP/USD Maintains Losses After Budget Statement

Justin McQueen, Strategist

GBP/USD Analysis and News:

  • OBR Slashes 2022 Growth Forecast to 3.8% from 6%
  • GBP Languishes Around Lows as Sunak Announces Cautious Spring Statement

UK Chancellor Sunak’s Spring Statement Overview

Main Points: In light of the worsening economic outlook, the OBR’s 2022 GDP forecast had been slashed to 3.8% from 6.0%. Meanwhile, inflation is seen averaging 7.4% for the year with a peak rate at close to 9% in Q4. Elsewhere, as widely touted, fuel duty will be cut by 5 pence per litre, lasting until March 2023.

While the planned national insurance tax hike will go ahead in April. The Chancellor did provide some welcome news by announcing a national insurance contribution threshold hike of GBP 3000 from July.

What’s more, Sunak also announced that income tax will be cut from 20% to 19% by 2024 signalling a pre-election tax cut. That said, this is still a cautious approach that Sunak is taking and thus has provided little in the way of support for the Pound, which continues to languish around intra-day lows.

GBP/USD Client Sentiment Suggests the Pair May Continue to Fall

data shows 65.44% of traders are net-long with the ratio of traders long to short at 1.89 to 1. The number of traders net-long is 6.74% lower than yesterday and 18.14% lower from last week, while the number of traders net-short is 9.84% higher than yesterday and 26.57% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

GBP/USD Maintains Losses After Budget Statement

Source: DailyFX, IG

More analysis on the Pound

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

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