Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3100.
- Add a stop-loss at 1.3350.
- Timeline: 1-2 days.
Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3350.
- Add a stop-loss at 1.3100.
The GBP/USD exchange rate continued its recent rally as market participants reacted to the latest autumn budget by Rachel Reeves in the United Kingdom. It rose to a high of 1.3230, its highest point since October 29. It has jumped by 1.65% from its lowest point this year.
Rachel Reeve Tax Hikes
The GBP/USD pair rebounded after the latest Reeves speech in which she raised taxes on everyone. Analysis showed that taxes will go up by about £40 billion. Most of these funds will go towards more welfare spending and bolster her fiscal headroom against future shocks.
Some of the introduced taxes are on landlords, which will be carried over to tenants. Reeves will also introduce new taxes on dividends and mansions. Analysts anticipate that these tax increases may slow the economy and trigger capital flight.
Reeves statement boosted the sterling, stocks, and the bond market. The ten-year government bond yield dropped to 4.42% from this week’s high of 4.629%, while the FTSE 100 Index rose by 0.85%.
One reason for the rally in UK assets is that some of the biggest tax increases will only start after the next election, which must happen by the summer of 2029. As such, they will not have an immediate impact on the economy.
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The GBP/USD pair will likely continue reacting to the budget speech as there will be no notable macro data from the US and the UK. Indeed, activity across all markets will be muted as the US celebrates the Thanksgiving weekend.
GBP/USD Technical Analysis
The GBP/USD pair has rebounded in the past few days, moving from this month’s low of 1.3010 to the current 1.3225. Its current price aligns with the upper side of the bearish flag channel.
The pair has moved above the 50-day moving average and the 38.2% Fibonacci Retracement level at 1.3155. However, the pair remains below the Ichimoku cloud and the Supertrend indicators.
Therefore, the most likely GBP/USD forecast is bearish, with the initial target being the psychological point at 1.3100. However, more gains will be confirmed if the Supertrend indicator turns green.
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