- The pound reaches the resistance of 1.1400 after a recovery of 300 points.
- News of a twist in the UK tax plan drives the wire.
- GBP/USD trades between 1.00 and 1.10 in the coming months – UBS.
GBP looks to be taking a breather as the impressive 300 point rally from the 1.1060 area has found sellers at 1.1380 before pulling back to the 1.1300 area lower. The pound remains positive on the daily charts after having appreciated more than 3% in the last two days.
Hopes of a twist in the UK fiscal plan have buoyed the pound.
News that the UK government may be debating corporate tax hikes next year, thereby reversing the mini-budget that shocked markets last month, has been welcomed by investors.
In addition, the Financial Times reported on Wednesday that the Bank of England may have privately agreed with lenders to extend bond purchases beyond Friday, the announced deadline for the emergency plan. This has helped relieve negative pressure on the cable.
Against this background, the market has overlooked the gloomy macroeconomic data released on Wednesday. National statistical data revealed that the UK economy shrank 0.3% in September, against expectations of a flat performance, due to a 1.6% drop in manufacturing output.
GBP/USD trades between 1.00 and 1.10 in coming months – UBS
Looking at a broader perspective, UBS FX analysts see the pair capped below 1.10 for the next few months: “With markets still concerned about the viability of the government’s fiscal plans, we believe the pound will remain volatile, trading in a range of 1.00-1.10 against the US dollar for the next few months (…) Concerns about the financial stability of the UK are also fueling the risk aversion of the market in general, which is also positive for the US dollar “.
Technical levels to watch
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
