Skip to content British Pound Rises Amid Borrowing Speculation
The British Pound is increasing, approaching $1.3, after dipping to a two-month low. This change follows reports that the UK’s finance minister, Rachel Reeves, might approve additional borrowing in the next budget. This could lead to a delay in anticipated interest rate reductions by the Bank of England.
Reeves Eyes Fiscal Shift to Boost Public Investments
Reeves is considering adjusting fiscal guidelines to focus on the public sector’s net financial liabilities, which may allow for significant increases in capital investments. According to the Institute for Fiscal Studies, such changes could have permitted an additional £53 billion in borrowing last March.
However, the Treasury has stated it does not plan to use this extra borrowing capacity immediately.
Bank of England Faces High Inflation – No Rate Cut in Sight
Meanwhile, Bank of England Governor Andrew Bailey worries about ongoing high inflation. Despite lower-than-anticipated inflation, the economy is undergoing structural shifts, with continued high inflation in services posing challenges.
Consequently, market expectations for a rate decrease by the Bank of England in November have decreased significantly, from a certainty to 86%. Recent preliminary data also indicate slower growth in the UK’s manufacturing and service sectors than expected for October.
GBPUSD Analysis – 24-October-2024
The GBP/USD pair trades slightly below the 1.299 resistance, testing the Fair Value Gap, backed by the median life of the Bollinger Band. The primary trend is bearish because the price is below the Ichimoku cloud. Interestingly, MACD signals divergence, which could result in a higher price surge.
From a technical perspective, the current uptick momentum could extend to the $1.0303 resistance if bulls pull GBP/USD above the $1.2993 and the Ichimoku Cloud.
Conversely, the downtrend will likely resume if bulls fail to exceed the $1.299 resistance.
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