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GBP/USD: UK budget to drive the pound – TDS

GBP/USD has reversed its initial rate cut-induced weakness in a sign that FX markets are likely to reward currencies where the authorities are willing and able to act to counter the macro risks presented by the viral outbreak. This puts today's UK budget announcement into clear view as the next major directional driver for GBP, in the opinion of analysts at TD Securities.

Key quotes

“We think the 1.2870/1.2900 zone is probably the key pivot for this morning. All else equal, we would expect that to remain the centre of gravity ahead of the announcement.” 

“With spot currently hovering around 1.2905, an underwhelming fiscal package could quickly bring a test of 1.2740 into view in the days ahead - especially if sentiment sours more broadly.” 

“Of particular interest will be to see how strongly the government pledges its allegiance to its fiscal rules or signals a newfound flexibility around them. There, a more positive and expansionary outcome could see cable move back to 1.2980 ahead of more meaningful resistance we think could arise around 1.3020.”


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