GBP/USD Maintains Losses After Fiscal Statement
GBP/USD Analysis and News:
- OBR cuts 2022 growth forecast to 3.8% from 6%
- GBP languishes around lows as Sunak announces cautious spring statement
Preview of UK Chancellor Sunak’s spring statement
Main points: Given the deteriorating economic outlook, the OBR’s GDP forecast for 2022 had been cut to 3.8% from 6.0%. At the same time, inflation should average 7.4% over the year, peaking at nearly 9% in the fourth quarter. Elsewhere, as widely announced, fuel taxes will be reduced by 5p per litre, until March 2023.
While the planned National Insurance tax hike will continue in April. The Chancellor brought some good news when she announced a rise in the National Insurance contribution threshold of GBP 3,000 from July.
Additionally, Sunak also announced that income tax will be reduced from 20% to 19% by 2024, signaling a pre-election tax cut. That said, this is still a cautious approach from Sunak and has therefore provided little support for the pound, which continues to languish around intraday lows.
GBP/USD Client Sentiment Suggests the Pair Could Continue Lower
data shows that 65.44% of traders are net long with a ratio of long to short traders of 1.89 to 1. The number of net long traders is 6.74% lower than yesterday and 18, 14% lower than last week, while the number of net-short traders is 9.84% higher than yesterday and 26.57% higher than last week.
We generally take a contrarian view of crowd sentiment, and the fact that traders are net buyers suggests that GBP/USD prices may continue lower.
Still, traders are net less long than yesterday and compared to last week. Recent shifts in sentiment warn that the current GBP/USD price trend may soon reverse higher despite traders staying sharp.
Source: DailyFX, IG
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