GBP/USD awaits UK Autumn Budget to extend gains to 1.3000
- GBP/USD buyers await fresh clues to extend the two-day winning streak.
- The EU keeps threatening, UK responds but the coronavirus improves risk-tone.
- Fed Chair Powell’s testimony, Brexit headlines will also have their impact on the pair.
GBP/USD registers modest changes, currently at 1.2960, while heading into the London open on Wednesday. The pair recently benefited from the US dollar pullback and improved fundamentals in the UK. However, the absence of fresh catalysts left traders by the press time.
The pair registered gains on Tuesday even if the UK data dump and BOE’s Carney failed to provide any clear direction to the British central bank’s future moves. Relating to this, analysts at the Australia and New Zealand Banking Group said, “UK economy drifted sideways in Q4. The focus is on Q1 for a rebound. Overall, activity may have been weighed by Brexit uncertainty, the general election and global trade tensions. Looking forward, early 2020 data are signaling a rebound. And if that doesn’t materialize, BoE Governor Carney has signaled the BoE might need to add more accommodation.”
Elsewhere, the European Union (EU) leaders continue to dash expectations that the City of London can hold its right to do business across the region after Brexit. However, the UK diplomat shows their “upper hand” over fisheries to warn before taking any decisions while meeting on the negotiation table during early March.
Market’s risk-tone benefits from the receding cases of coronavirus in China, which in turn weigh on the US dollar’s safe-haven demand.
Investors will await details of the government's Autumn Forecasts Statement that will also accompany updated economic outlook and previews the government's budget for the coming year. While the Tory government’s latest approval to HS5 and bus services have been praised, expectations of a tax on wealthy homes could weigh on sentiment. Also, comments from the UK Health Secretary Matt Hancock, which mentioned that the spread of the virus "will get worse before it gets better", question the buyers.
On the other hand, the US Federal Reserve Chairman Jerome Powell will appear for the second testimony, this time before the Senate Housing Committee. Should the Fed supremo maintain his cautious optimism, chances of the cables pullback increase.
A confluence of 21-day and 50-day EMAs near 1.3010/15 becomes the key upside barrier while the weekly low around 1.2870 could offer immediate support to the pair during its fresh declines.