GBP/USD is the leader in terms of volatility of currency pairs at Forex. Last week the pair collapsed by 1000 pips, but then it won back almost 700 pips. The upward trend remains in the trading session on Wednesday. The asset remains around 1.1460, approaching the key resistance 1.1500.
On September 23, the British government published a tax cut plan on top of previously announced measures to support households in paying for electricity.
According to calculations of analysts of S&P GR these measures will lead to expansion of the state budget deficit by 2.6% of GDP by the end of 2025. Besides, experts warn about possible growth of borrowings on the foreign market, which may lead to the expansion of net external debt up to 97% of GDP by the end of 2024.
Investors reacted to the news with a total sell-off in sterling. GBP/USD dropped to a historic low of 1.0356 having lost 20% since the beginning of the year.
The UK government began to rescue the situation and made adjustments to the announced reforms. The Cabinet has canceled the tax cuts, but retained other mechanisms of social protection, although the program of subsidizing of energy bills will cost the budget more than $100 billion.
Analysts believe the stimulus will further accelerate inflation and increase pressure on the economy, bringing a prolonged recession closer. S&P GR downgraded the British rating from "stable" to "negative".
We believe that the fundamental background remains bearish and GBP/USD may resume its decline at any moment. We suggest placing an order:
GBP/USD Sell-stop 1.1400 take-profit 1.1200 stop-loss 1.1470.
More about GBP/USD trading
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