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

• With little fiscal headroom, UK Finance Minister John Healey is under pressure to provide relief from living costs.
• An unchanged Fed interest rate decision is the market expectation as investors await fresh economic data.
• Demand for US Treasury bonds eased as sentiment towards AI improved ahead of technology-sector earnings.

Selling pressure on GBP/USD persists for a fourth straight day, leaving the pair near 1.3290 in Wednesday’s Asian session. Later in the day, UK Finance Minister John Healey is due to unveil his first budget, which traders are awaiting.

Relief for households facing persistent cost-of-living pressures and much-needed assistance for businesses nationwide are the competing demands on UK Finance Minister Healey, who faces increasing pressure to deliver both.

There is, however, very little flexibility in Healey’s policy choices. High government borrowing costs, alongside the sizeable tax rises introduced earlier by his predecessor, Rachel Reeves, leave the minister operating within tight fiscal limits.

Caution before the US Federal Reserve’s (Fed) interest rate announcement later in the day is supporting the US Dollar (USD), weighing on GBP/USD. To assess the likely course of monetary policy, investors are also tracking major economic releases, notably GDP growth and the Personal Consumption Expenditures (PCE) price index.

An unchanged benchmark interest rate, within the existing target range of 3.75% to 4.0%, 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 an 84.4% probability of a rate increase in December. Any nuanced signals on the central bank’s economic outlook in Fed Chair Kevin Warsh’s comments will draw close scrutiny from traders.

At the same time, improving sentiment towards artificial intelligence has curbed appetite for safe-haven Treasury bonds. Earnings releases due from leading technology companies are expected to shed fresh light on AI-related demand—a major contributor to US economic growth—as some of the safe-haven inflows prompted by the recent global technology sell-off unwind.

Technical Analysis: Can GBP/USD Break Above Its EMA Barriers?

Selling pressure continues to cap GBP/USD on the daily chart, with the pair at 1.3290 below both the short-term Exponential Moving Average (EMA) of 1.3323 and the 50-day EMA of 1.3351. Trading beneath the nine-day and 50-day EMAs indicates that the recent recovery effort is running out of steam, leaving the broader bearish structure in place. Meanwhile, the 14-day Relative Strength Index (RSI), at around 46, points to weakening bearish momentum that has not yet reached oversold territory.

The nine-day EMA presents the first resistance on any advance, followed by the 50-day EMA. A daily close above the latter would be required to relieve near-term selling pressure and pave the way for a more durable recovery. Unless the pair regains these moving averages, rallies are likely to attract renewed selling. Price behaviour around these EMA ceilings will therefore remain in focus as traders assess whether bears still hold the upper hand.

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