GBPUSD not entirely convince by UK tax cut U-turn
The GBPUSD had seen significant volatility recently
- Late September, the GBPUSD fell from 1.1215 to reach 1.0361 because of the announcement of tax cuts, the biggest in 50 years.
- The BoE tried to rescue the situation by announcing plans to undertake temporary and targeted purchases in the gilt market (buying long-dated UK government bonds). This brought prices from 1.07 back toward 1.1215
- The government performs a U-turn on the plans to cut taxes, followed by the sacking of the finance minister, but the markets seem unconvinced, with the GBPUSD reaching a high of 1.15 but eventually settling along the 1.1215 price area.
- Recent CPI data (10.1%) from the UK indicates continual inflation growth (sticky inflation) despite the best efforts of the BoE with increasing interest rates.
- The GBPUSD is likely to continue trading with very choppy price action, with the overall directional bias likely to be more dependent on the strength/weakness of the US Dollar.
- If the GBPUSD breaks below 1.12, the price could continue sliding down towards the 1.09 support area. Beyond 1.09 could see a significant drop toward 1.07. It is unlikely that the price could fall towards 1.03, barring surprise announcements again.
- Upside potential on the GBPUSD seems unlikely and limited
- Late September, the GBPUSD fell from 1.1215 to reach 1.0361 because of the announcement of tax cuts, the biggest in 50 years.
- The BoE tried to rescue the situation by announcing plans to undertake temporary and targeted purchases in the gilt market (buying long-dated UK government bonds). This brought prices from 1.07 back toward 1.1215
- The government performs a U-turn on the plans to cut taxes, followed by the sacking of the finance minister, but the markets seem unconvinced, with the GBPUSD reaching a high of 1.15 but eventually settling along the 1.1215 price area.
- Recent CPI data (10.1%) from the UK indicates continual inflation growth (sticky inflation) despite the best efforts of the BoE with increasing interest rates.
- The GBPUSD is likely to continue trading with very choppy price action, with the overall directional bias likely to be more dependent on the strength/weakness of the US Dollar.
- If the GBPUSD breaks below 1.12, the price could continue sliding down towards the 1.09 support area. Beyond 1.09 could see a significant drop toward 1.07. It is unlikely that the price could fall towards 1.03, barring surprise announcements again.
- Upside potential on the GBPUSD seems unlikely and limited
