GBP/USD Surges After U-Turn On Fiscal Plan
The GBP/USD started October on a positive note, extending its bounce from a record low and posting its fifth gain in a row after the U.K. confirmed a fiscal policy U-turn. In the meantime, the greenback continues to correct lower after an outstanding rally over the last weeks.
At the time of writing, the GBP/USD is trading at the 1.1310 area, 1.4% above its Friday’s close and having peaked at an 11-day high of 1.1334.
After the recent market turmoil amid a controversial tax cut in the U.K., the government announced Monday that it would reverse its plans. Chancellor of the Exchequer, Kwasi Kwarteng, stated that the former method to cut the top 45% income tax rate paid on earnings would not proceed. “We get it, and we have listened,” said Kwarteng. The knee-jerk reaction was an upsurge in the sterling.
Across the pond, the U.S. dollar extended its pullback, further weighed by disappointing economic data. Despite the S&P and ISM Manufacturing PMIs for September confirming an expansion of the sector, the latter came in at 50.9, down from the previous reading of 52.8 and missed the market consensus of 52.2.
From a technical perspective, the GBP/USD pair maintains a short-term bearish bias, although indicators are beginning to gather upward momentum according to the daily chart. The RSI points higher, about to cross its midline, while the MACD jumped to positive territory.
On the upside, the immediate resistance level is seen in the 1.1370 zone, followed by the 1.1400 area. On the other hand, the immediate support level could be faced at the 20-day SMA, currently at 1.1290, followed by the 1.1200 psychological level.
At the time of writing, the GBP/USD is trading at the 1.1310 area, 1.4% above its Friday’s close and having peaked at an 11-day high of 1.1334.
After the recent market turmoil amid a controversial tax cut in the U.K., the government announced Monday that it would reverse its plans. Chancellor of the Exchequer, Kwasi Kwarteng, stated that the former method to cut the top 45% income tax rate paid on earnings would not proceed. “We get it, and we have listened,” said Kwarteng. The knee-jerk reaction was an upsurge in the sterling.
Across the pond, the U.S. dollar extended its pullback, further weighed by disappointing economic data. Despite the S&P and ISM Manufacturing PMIs for September confirming an expansion of the sector, the latter came in at 50.9, down from the previous reading of 52.8 and missed the market consensus of 52.2.
From a technical perspective, the GBP/USD pair maintains a short-term bearish bias, although indicators are beginning to gather upward momentum according to the daily chart. The RSI points higher, about to cross its midline, while the MACD jumped to positive territory.
On the upside, the immediate resistance level is seen in the 1.1370 zone, followed by the 1.1400 area. On the other hand, the immediate support level could be faced at the 20-day SMA, currently at 1.1290, followed by the 1.1200 psychological level.
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