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GBP/USD: UK budget to face the bears

The GBP/USD pair witnessed a dramatic turnaround on Tuesday and tumbled nearly 250 pips intraday amid resurgent US dollar demand. The set-up seems to have shifted back in favour of bears ahead of the UK annual budget, Haresh Menghani from FXStreet informs.

Key quotes

“Hopes of fiscal stimulus by the Trump administration provided a strong boost to the global risk sentiment and the same was evident from a strong rally in the US equity markets. This allowed the US Treasury bond yields to rebound sharply from historic lows and underpinned the USD demand.”

“Sunak is expected to abandon the austerity policies of previous governments and raise expenditure on infrastructure. Any extraordinary relief on the back of the coronavirus outbreak might ease pressure on the Bank of England to ease further and might act as a positive trigger for the British pound.”

“The release of the latest US consumer inflation figures will also be looked upon for some impetus. The headline CPI is expected to have edged lower to 2.2% YoY rate in February as compared to 2.5% previous.” 

“This followed by the US Treasury Secretary Steven Mnuchin's testimony on the Proposed Fiscal Year 2021 Budget should play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities.”


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