UK Chancellor of the Exchequer Rachel Reeves has announced that the country’s annual budget will be revealed on November 26. During her statement, Reeves underscored her belief that the UK economy is not “broken,” asserting that the government will take a stringent approach to fiscal spending. This strategy is aimed at curbing inflation and reducing borrowing costs. Despite this optimism, concerns linger about the long-term sustainability of UK finances. Such anxieties are exerting pressure on the pound, which has seen a decline against the US dollar (GBP/USD).
In the United States, labor market data revealed a drop in job openings for July, falling to 7.181 million from a revised figure of 7.357 million in June. This figure also came in below market expectations of 7.4 million. The disappointing employment numbers have bolstered market speculation regarding a potential rate cut by the Federal Reserve this month. According to the CME FedWatch tool, the probability of a 25-basis point rate cut has surged to 97%, up from 91% just a week earlier. Analysts are now projecting a total rate cut of 139 basis points by the end of next year. The weak employment data has contributed to a short-term decline in the strength of the dollar, which in turn has eased some pressure on the GBP/USD exchange rate.
From a technical standpoint, GBP/USD has been experiencing weak movements around the 1.3430 mark. Short-term moving averages reflect a slight downward trend, while the Relative Strength Index (RSI) sits just below the neutral level, indicating ongoing selling pressure. Should the currency pair break below the critical support level of 1.3400, it may experience additional retracement towards the 1.3350-1.3320 range. Conversely, if it manages to rebound and surpass resistance levels set at 1.3475-1.3480, GBP/USD could regain some upward momentum, targeting approximately 1.3520.
In summary, the short-term trajectory of GBP/USD is being shaped by a combination of economic developments in both the UK and the US. Fiscal concerns in the UK are placing downward pressure on the pound, while weak employment data in the US is creating expectations for interest rate cuts that may limit any dollar rebound. As traders await both the UK budget announcement and further employment data from the US, it is anticipated that the exchange rate will remain confined within the 1.3400-1.3480 range. However, any signs of improved confidence in UK fiscal policy or accelerating expectations for US rate cuts could trigger a breakout from this established range in the coming period.
