- GBP/USD consolidates the previous day’s pullback from weekly top.
- France braces for a Brexit fight over fishing issues, UK’s Frost hints at easy checks on EU imports.
- UK Chancellor Sunak to unveil budget 2021, NHS relief, minimum wage hike eyed.
- US Durable Goods Orders, Treasury yields important too.
GBP/USD picks up bids to 1.3775, reversing the previous day’s U-turn from weekly high heading into the key London open on Wednesday. The cable pair benefits from the US dollar pullback ahead of the annual budget announcement by UK Finance Minister (Chancellor of the Exchequer) Rishi Sunak.
The £7 billion aid to the UK’s National Health Services (NHS) and a push to the minimum wage hike to £10 have already been discussed as the promising offers from Mr. Sunak. However, the mystery lies in how the diplomat manages to tame the record budget deficit and the surging inflation.
On the same line, Reuters conveyed the news that the British Retail Consortium (BRC) eyes further jump in the UK inflation ahead of Christmas. The news quotes the BRC executive Helen Dickinson to mention that three in five retailers planned to raise prices before Christmas. “It is now clear that the increased costs from labor shortages, supply chain issues and rising commodity prices have started filtering through to the consumer," adds Dickinson per Reuters.
It should be noted covid fears are regaining momentum in Britain of late. The latest virus-led deaths jump to the highest since March while the daily infections also jumped past 40,000 levels per the latest government figures.
Elsewhere, Thierry Breton, the European Union’s (EU) internal market Commissioner termed Brexit as a catastrophe and causing shortages as the bloc’s representatives arrive in the UK for talks. Joining the line were diplomats from France as The Times reports, “France intends to retaliate against Britain’s refusal to offer more permits for French fishermen working in British inshore waters and is likely to announce its measures today.” Further, Politico quotes UK Brexit Minister David Frost to mark the likelihood of easy checks on the goods from the EU.
Alternatively, the US Dollar Index (DXY) snaps a two-day rebound from the monthly low as market sentiment dwindles ahead of the US Durable Goods Orders for September, expected -1.1% versus +1.8% prior. Even so, US stimulus optimism and receding COVID-19 fears in the US weigh on the greenback of late.
Looking forward, US data and risk catalysts may affect the GBP/USD prices but the UK budget and Brexit will be more important.
Technical analysis
Given the sluggish Momentum and the quote’s latest break below the 50-SMA on the four-hour (4H) chart, the sellers are sneaking in for entries. However, the weekly trading range and the stated support line, respectively around 1.3750 and 1.3740, could restrict the short-term GBP/USD declines.