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GBPUSD Market Update

3/16/2023 10:44 AM

The GBP/USD pair is trading with a weak uptrend, trying to regain ground after a two-day decline, which led to the renewal of local lows from March 10. The pound is testing 1.2080 for a breakout, waiting for new drivers to appear on the market.

Today, investors will evaluate macroeconomic statistics from the US on the dynamics of Jobless Claims, as well as data on Housing Starts, and tomorrow the release of March statistics on the Michigan Consumer Sentiment Index and February Industrial Production are expected. Forecasts assume that Consumer Sentiment will remain at the level of 67.0 points, while Industrial Production may grow by 0.4% after the zero dynamics in January.

The day before, the Chancellor of the Exchequer, Jeremy Hunt, presented the budget for the current year in Parliament, the main goal of which, according to the official, was to stabilize the national economy. According to estimates based on Office for Budget Responsibility (OBR) calculations, against the backdrop of a significant reduction in energy spending at the end of the year, Gross Domestic Product (GDP) corrected only -0.2%, and not -1.5%, as previously estimated, and in 2024 it will add 1.8% and 2.5% in 2025. In 2026, the indicator is expected to correct upward by 2.1% and by 1.9% in 2027. Thus, the economy will not enter a technical recession in 2023, as previously predicted. At the same time, the inflation rate should decrease to 2.9% by the end of the year, which is significantly less than the peak value of 10.1%. In addition, in this year's spring budget, Jeremy Hunt announced a support package for parents, many of whom are unable to return to work amid rising childcare costs. In addition, the lifetime limit on tax-free pension contributions will be lifted in April (it is now possible to save 1.07 million pounds before the additional tax starts to be levied). According to the minister, such a move will help to somewhat compensate for the shortage of labor, as it will allow workers not to retire longer and not refuse to work overtime due to the payment of state taxes. 

Investors continue to predict the outcome of the upcoming meeting of the Bank of England next week. The situation was aggravated by reports of the bankruptcy of large US banks at the beginning of this week, which also led to a reassessment of the prospects for the future monetary policy of the US Federal Reserve. If earlier the markets were confident in raising the interest rate by 25 basis points or 50 basis points, now some experts believe that the regulator may take a wait-and-see attitude and return to adjusting the value in May.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is changing slightly, but remains rather spacious for the current level of activity in the market. MACD is trying to reverse downwards but preserves its previous buy signal (located above the signal line). Stochastic shows a much more confident decline, rapidly retreating from the highs, indicating the risks of overbought pound in the ultra-short term.

Resistance levels: 1.2100, 1.2140, 1.2176, 1.2236. | Support levels: 1.2054, 1.2000, 1.1933, 1.1875.

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