- Market sentiment bearish as investors weigh Q4 economic outlook and US fiscal policy woes.
- UK Treasury unveils £75 billion budget, cut taxes on pubs and restaurants.
- UK economy to grow 6.5% by year-end.
- US durable goods orders were better than expected, but contracted.
GBP/USD declined during the U.S. session, down 0.12%, trading at 1.3748 at the time of writing.
Investor sentiment was negatively affected by month-end flows, portfolio reshuffling, economic growth concerns and US fiscal policy issues. As evidenced by falling US equity indices. Safe-haven currencies such as the Japanese yen, Swiss franc, and US dollar are benefiting from flight to safety.
Finance minister Rishi Sunak, in a statement to the Parliament, announced a £75 billion budget that reduces taxes on pubs and restaurants, lowers alcohol tariffs, and increases support for the poorest citizens.
According to the Office for Budget Responsibility (OBR), the U.K. economy contracted by almost 10% in 2020. But is forecast to grow by 6.5%. Additionally, the OBR expects inflation to average 4%, double the Bank of England’s target, which the BoE is aware of, as some policymakers have expressed concern about high prices.
GBP/USD traders are focused on USD dynamics and developments since the UK economic docket is absent. In the U.S., durable good orders contracted 0.4% in September, less than analysts expected. Meanwhile, Non-Defense orders, excluding aircraft, increased 0.8%, up from 0.5% estimated.
GBP/USD traders will be watching the U.S Gross Domestic Product for the third quarter. Which is expected to be 2.5% on Thursday.
GBP/USD Price Forecast: Technical Outlook
The daily moving averages (DMAs) above the spot price indicate a slightly bearish trend. Except for the 50-day moving average of 1.3705, which was tested earlier today.
Moreover, the price action indicates that selling pressure was increasing on the pair. But it failed to break below the 50 DMA.
RSI (Relative Strength Index) is at 52, indicating that the downtrend could accelerate, but a piercing of the 50 midline would confirm the above.
A daily close below the 50 DMA could push GBP/USD below 1.3700. There are many key support levels to watch. The first support is the low of April 12 at 1.3669. Followed by the low of October 12 at 1.35.67, and then the low of 2021 at 1.3411