The GBPUSD Exchange Rate has the crucial British government budget ahead on Wednesday.
GBPUSD – Daily Chart
The GBPUSD has jumped above the support level at 1.3142 and could be looking to secure a strong low here.
It is finally time for the long-waited UK government budget that has cast a cloud over the British pound.
“We won’t have to do a budget like this ever again,” Britain’s finance minister Rachel Reeves said a year ago, insisting she had brought stability to the public finances on her first attempt.
When she delivers her second annual budget on Wednesday, she is expected to declare another round of tax increases, which could rattle bond markets. It has been a tough time for the UK economy and traders want to see how the country can navigate growth with all the punitive tax measures.
In early November, Reeves seemed to be laying the ground for an income tax rate hike after her party had campaigned on an election promise not to do so. That has led to investor confusion as no income tax hike raised the potential for multiple smaller tax hikes with unclear revenue.
Gilts, the UK’s government bonds, have been able to find some stability in recent weeks.
“She built up some credibility. You saw gilt yields start to react to that, and then basically she lost it,” said David Zahn at Franklin Templeton, which has $1.5 trillion of assets under management.
“It’s a G7 economy. We can’t keep on doing that,” said Nicolas Trindade AXA Investment Managers.
Big asset managers could be ready to move the British pound and the country’s stock market if the government cannot reassure them of growth ahead.
The UK’s benchmark 10-year gilt yields remain touched a 27-year high in September. That will be the market’s favoured indicator on Wednesday as the budget remarks are released.
