GBP/USD Forecast: Pound may propel higher if Powell gives green light after UK budget boost
Sterling to sink? Not under Rishi Sunak – the UK Chancellor of the Exchequer has surprised markets by announcing a “super deduction” for firms that would encourage investment. While Britain’s new budget consists of a sharp corporate tax hike in 2023 – from 19% to 25% – upbeat economic forecasts, extending the furlough scheme and other goodies seem to set the economy on a positive footing.
The pound also continues benefiting from the UK’s rapid rollout of vaccines, which are hovering near one-third of the population – the world leader among large countries. And now, the next moves depend solely on what happens in America.
GBP/USD to remain in an effective 1.38-1.43 range – Westpac
Further covid support in the UK Budget was offset by increased taxes in the next five years. Vaccine rollouts and restriction easing should keep the GBP/USD pair within a lower 1.38-1.43 range, economists at Westpac report.
Key quotes:“The UK’s March 2021 Budget once again underscored the extraordinary scale of the UK’s support for the economy. Even though Chancellor Sunak announced yet further extensions and increases in fiscal support to offset the impacts of the covid pandemic, the latest Office of Budget Responsibility Economic and Fiscal Outlook profiles an improved economic outcome from Nov ‘20 which pulls down the 2020-21 peak in Public Sector Net Borrowing from 19.0% of GDP to 16.9%.”
GBP/USD trades with modest losses below mid-1.3900s
The GBP/USD pair quickly retreated around 35-40 pips from the early European session highs and dropped to fresh daily lows, around 1.3930-25 region in the last hour.
The pair struggled to capitalize on its intraday uptick, rather met with some fresh supply near the 1.3965-70 region and was pressured by sustained US dollar buying interest. Investors remained optimistic about the prospects for a relatively stronger US economic recovery amid the progress on COVID-19 vaccinations and a massive US fiscal spending plan. The upbeat US economic outlook continued underpinning the USD, which, in turn, was seen as a key factor that exerted some pressure on the GBP/USD pair.
Credit: FX Street