Despite the short-term weakness shown by the USD, The British Pound is unable to move higher against it. GBP/USD will probably get more unstable as the Federal Reserve and the Bank of England are to publicize their latest monetary policy decisions in the next two days.
The new UK Prime Minister Liz Truss and her Chancellor of the Exchequer Kwasi Kwarteng will announce their growth plans to try and help the UK economy, even though the central bank’s decisions dominate the market this week. The plans include cutting National Insurance and canceling a hike in corporation tax.
The Prime Minister is to finalize plans and announce payments to assist individuals and businesses deal with soaring energy prices. The Prime Minister will announce energy payments on Wednesday, while the Chancellor will deliver his mini budget on Friday.
The UK borrowing costs indicate the market is taking a blurred view of the upcoming fiscal announcements. UK gilt yields continue to push to multi-year highs with the sensitive 2-year interest rate now offered with a yield of 3.25%, up 13 bp today and back at levels last seen at the end of 2008.
Sterling also falls against other currency pairs, including the USD, as traders continue to test levels of support.
Cable has pushed slightly higher, primarily due to a touch of US dollar profit-taking, after hitting a 37-year low at the end of last week. However, the USD is increasing steadily, causing it to weigh on cable continually. Unless the Bank of England surprises with a hawkish rate hike on Thursday, GBP/USD might move lower in the weeks ahead.
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