British Pound: Sterling supported by BoE and Budget relief – Societe Generale

GBP/USD support stands at 1.3250. Societe Generale analysts see room for a post-Budget relief rally ahead of a potentially hawkish Bank of England rate rise, with resistance at 1.3430. In their view, the UK remains on course for the G7’s fastest fiscal consolidation, potentially supporting Gilts and Sterling over time.

G7 Fiscal Consolidation Pace and BoE Outlook

Gilts responded positively to the UK Budget and a modest rise in DMO issuance concentrated at the front end. Decisions on welfare and defence spending were deferred, while the bank profit surcharge tax was increased to reduce household energy bills.

"Though spending risks remain, our economists note that UK is likely to remain the fastest fiscal consolidation among the G7."

"Conditional on the BoE getting inflation under control, the fiscal outlook and successful EU reset could lead investors to turn more bullish on UK fixed income and sterling over the medium term."

"Run of four days of profit taking ends in cable, green light for post-Budget relief rally."

"Hawkish BoE hike next week could add to short covering. Support 1.3250, resistance 1.3430."

"Support EUR/GBP 0.8355/30 into ECB."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)