British Pound weakens as UK Finance Minister Healey's budget approaches

• With little fiscal headroom, UK Finance Minister John Healey is under pressure to bring down living costs.
• Ahead of forthcoming economic releases, markets anticipate no change in interest rates from the Fed.
• Demand for US Treasury bonds has eased as AI sentiment improves and tech earnings approach.

GBP/USD trades near 1.3290. The pair is extending its decline into a fourth consecutive day during Wednesday’s Asian session, with traders awaiting UK Finance Minister John Healey’s first budget later in the day.

Pressure is building on UK Finance Minister Healey to relieve households’ persistent cost-of-living burden. He also faces calls to provide much-needed assistance to businesses nationwide.

There is little scope for policy action, however. High government borrowing costs and the substantial tax rises introduced by his predecessor, Rachel Reeves, leave Healey operating within tight fiscal limits.

Caution ahead of the US Federal Reserve’s (Fed) rate announcement later in the day is supporting the US Dollar (USD), weighing on GBP/USD. For further signals on the monetary policy outlook, investors are also tracking major economic releases, including GDP growth and the Personal Consumption Expenditures (PCE) price index.

An unchanged benchmark rate within the current 3.75% to 4.0% target range is widely anticipated from the Fed on Wednesday. The CME FedWatch tool puts the market-implied probability of a hold at this meeting at 92.8%, with the probability of a December rate increase at 84.4%. Remarks from Fed Chair Kevin Warsh will be scrutinised for subtle indications of the central bank’s economic outlook.

Better sentiment towards artificial intelligence has also curbed demand for safe-haven Treasury bonds. Earnings due from major technology companies are expected to shed new light on AI-related demand, a substantial contributor to US economic growth. This has partly unwound the safe-haven flows prompted by the recent global technology sell-off.

Technical Outlook:

At 1.3290 on the daily chart, GBP/USD remains constrained below the short-term Exponential Moving Average (EMA) of 1.3323 and the 50-day EMA of 1.3351. Trading beneath both the nine-day and 50-day EMAs indicates that the recent recovery attempt is running out of momentum, leaving the broader bearish structure in place. Near 46, the 14-day Relative Strength Index (RSI) points to fading bearish momentum without yet signalling oversold conditions.

The nine-day EMA marks the first resistance level, followed by the 50-day EMA. A daily close above the latter would be required to relieve near-term downside pressure and create scope for a more durable recovery. Below these moving averages, rallies are likely to remain exposed to fresh selling. Traders will monitor price behaviour around the EMA barriers to assess whether sellers remain in control.

(The technical analysis of this story was written with the help of an AI tool. Know more.)