GBP/USD Technical Analysis: Limited Movement, Upcoming Move

• For six consecutive trading sessions, the price of the GBP/USD currency pair is trying to rebound to the upside.
• The gains of this move did not exceed the resistance level 1.2794 today, after sharp losses for the currency pair that pushed it towards the support level 1.2666.
• The currency pair may continue to move in narrow ranges until the reaction on what will be received from the statements of global central bank officials during the Jackson Hole Symposium, which is organized by the US Federal Reserve Bank.

British government borrowing came in below official forecasts in the first four months of the financial year, opening potential room for Chancellor Jeremy Hunt to cut taxes. In this regard, the Office for National Statistics said today, Tuesday, that the budget deficit between April and July amounted to 56.6 billion pounds (72.3 billion dollars). This is £11.4 billion less than the Office for Budget Responsibility’s forecast in March.

The deficit in July alone was £4.3bn, below the median forecast of £5bn in a Bloomberg poll but up from £1.1bn a year earlier. The Office for National Statistics also revised figures from previous months, showing that the total volume of Treasury debt never exceeded the size of the economy, a limit it previously said it had. The revisions are likely to do little to ease broader concerns about the pace of borrowing in Britain, where the country bears £2.58tn of debt, or 98.5% of annual economic output. The heavy reliance on index-linked bonds at a time of high inflation also means that Britain pays more to service its obligations than any other advanced economy.

Hunt will then have an opportunity to address the debt issue in the fall budget statement expected in November. Some members of the ruling Conservative Party, which trails Labor by a wide margin in opinion polls, have urged Prime Minister Rishi Sunak to cut taxes ahead of the election. July is one of the best months for the public finances, as income taxes roll in before the deadline at the end of the month for the self-employed. Income tax payments from self-assessments rose to £11.8 billion, which is £2.5 billion more than last year.

According to the performance on the daily chart below, the GBP/USD currency pair is in the stage of breaking the downward trend. This may happen only if the bulls return in the currency pair towards the resistance levels 1.2860 and the psychological top 1.3000 again. It is not excluded that the bears will move in the currency pair towards the psychological support level of 1.2600 in the event that the dollar gets a strong momentum from the statements of Jerome Powell, Governor of the Federal Reserve Bank, at the end of the week about the course of tightening the bank’s policy, especially since there has been no recession in the US economy that requires stopping.