The Pound Sterling (GBP) has fallen against the US Dollar (USD) as UK inflation figures were lower than anticipated, while the Spring Budget drew attention. GBP/USD now trades at 1.2895, down 0.36%.
Following the Spring Statement by UK Chancellor Rachel Reeves, GBP faced additional selling pressure. The budget plan aims to save £4.8 billion through adjustments in welfare spending, maintaining a tax freeze after recent increases to social security contributions.
Sterling Faces Selling Pressure
Despite recent gains, GBP/USD is currently hovering around 1.2930, suggesting a potential test of the nine-day EMA barrier near 1.2950 as the pair consolidates within an upward trend.
We’ve seen Sterling take a step back against the Dollar, largely due to inflation figures that came in lower than expected. This immediately sparked speculation that the Bank of England might hold off on any further rate increases, a factor that tends to make a currency less appealing for investors looking for higher yields. Added to that, the Spring Budget introduced by Reeves put more attention on fiscal tightening, which has likely reinforced the currency’s pullback. Traders seem to have reacted to the planned £4.8 billion in welfare savings and the decision to maintain the tax freeze. While neither move was entirely unexpected, the market has taken this as an additional reason to be cautious.
The Sterling-Dollar pair has remained relatively strong despite this pullback, staying near 1.2930 after recent gains. This suggests that it may still have room to rise further, with the current price action indicating a potential retest of the nine-day EMA close to 1.2950. Should it break through this level, the next focus for market participants will likely be the broader trading trend, which has generally been pointing upward.
For those dealing in derivatives, these fluctuations present opportunities but also risks. The recent drop highlights just how quickly sentiment can shift based on data releases and policy decisions. If weaker inflation continues, it could weaken the case for more aggressive interest rate policies in the UK, potentially capping any Sterling strength moving forward.
External Factors And Future Outlook
On the other hand, external factors—including how the Federal Reserve approaches its own policy decisions—will have a role to play. If US economic indicators start to show signs of cooling, that could weigh on the Dollar, providing some relief for Sterling. These factors mean traders need to keep a close watch on policy statements from both sides of the Atlantic.
In the short term, attention may remain on technical levels, particularly whether Sterling can establish a foothold beyond the nine-day EMA. A convincing move past that level could reinforce the argument that the pair remains in an upward path. However, if pressure persists and the pair moves further away from 1.2930, we could see a deeper retracement before any further gains are attempted.
With upcoming UK and US economic data releases, expectations around central bank policies will continue to shape movements. Those navigating shorter-term price action will need to be prepared for swift shifts in momentum.
