GBP/USD Hits $1.3360 After Budget Boost: Pound Eyes $1.3414 Next
The British Pound continues to advance, with GBP/USD trading near $1.3360 during Thursday’s European session. The move builds...
Quick overview
- The British Pound is gaining strength, with GBP/USD trading around $1.3360 following the UK's budget announcement that eased tax and borrowing concerns.
- Investor sentiment improved as the UK government avoided broad tax increases, leading to a one-month high for GBP/USD.
- The US dollar is weakening due to expectations of a Federal Reserve rate cut, with traders assigning an 89% probability to a December reduction.
- Technically, GBP/USD remains above $1.3328, with resistance levels at $1.3414 and $1.3469, although overbought conditions may lead to a brief pullback.
The British Pound continues to advance, with GBP/USD trading near $1.3360 during Thursday’s European session. The move builds on momentum that started after the UK unveiled its late-November budget, which eased investor concerns about tax increases and borrowing. Markets viewed the fiscal outlook as more stable than expected, helping the Pound recover after weeks of uneven performance.
At the same time, the US dollar remains under pressure as traders become increasingly confident that the Federal Reserve will shift to a softer stance. The mix of a firmer Pound and a softer Dollar has created a supportive backdrop for GBP/USD throughout the week.
UK Budget Sentiment Lifts the Currency
The UK budget sparked a quick improvement in investor sentiment. The government avoided broad tax increases, and Labour signaled it wouldn’t borrow more for day-to-day expenses if elected — a message that reassured markets about fiscal discipline.
These elements helped GBP/USD hit a one-month high, but some analysts warn the rally may not be sustainable. Goldman Sachs has pointed out that softening UK data and expectations of earlier Bank of England rate cuts could slow the Pound’s rise. Markets now see a strong likelihood of a 25-bp BoE rate cut to 3.75% on December 18, given cooling labor conditions.
Dollar Weakens as Fed Cut Bets Rise
The US dollar continues to lose ground amid signs of softening labor markets. The November ADP report showed a 32,000 job decline, compared with expectations for a small gain. Traders now assign an 89% probability to a Fed rate cut in December.
While the ISM Services PMI came in slightly stronger at 52.6, it wasn’t enough to offset concerns about slowing growth.
Key US data ahead:
- Michigan Consumer Sentiment
- Inflation expectations for December
- September PCE Price Index
GBP/USD Technical Outlook
Technically, GBP/USD is holding firmly above $1.3328, after breaking a descending trendline that capped price through November. The 20-EMA at $1.3283 is sloping upward, aligning with the ascending trendline from the late-November low — a structure that continues to generate higher lows.
Resistance sits at $1.3414, followed by $1.3469 if buyers extend momentum. The RSI near 73 signals overbought conditions, so a brief pullback into $1.3328 wouldn’t be surprising. However, as long as the price stays above the rising trendline, the overall bullish bias remains intact.
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