The GBP/USD currency pair edged lower on Wednesday, after rallying in the last two days. The duo changed hands just above 1.2930 in the Asian morning. It came under increasing fire and eventually collapsed to a new two-week low under 1.2900 by the US session. The British Pound Sterling continues to lose value against the US Dollar. This fall comes on the heels of weaker-than-expected inflation data from the U.K. and a detailed scrutiny of the Spring Budget introduced by Chancellor Rachel Reeves.
According to technical analysis at GBP/USD pair still has a bullish bias even though the price moves above 1.40 signifies strong resistance. The duo is currently building strongly while in an ascending channel formation. This bodes well for upward movement, but it too is under inflationary pressure. The recent softness in February's inflation data has contributed to the midweek downturn, impacting investor sentiment and weighing on the Pound Sterling.
UK inflation figures released midweek came in much weaker than expected, adding to the volatility in currency markets. The forthcoming increase in employer National Insurance is pushing up service sector inflation. In February this core inflation surprised to the upside. All of these economic indicators are influencing market expectations and creating volatility in the GBP/USD exchange rate.
Besides all the domestic factors, external influences are in play. A mixed bag of economic indicators from the US were supportive of the US Dollar. Consequently, it gained back all of its losses compared to the British pound. Perhaps most importantly, the Greenback’s resilience offered a second layer of pressure on the GBP/USD pair, further weighing on the currency cross midweek.
Investors are now eagerly awaiting to see how things progress after the announcement of the UK’s Spring Budget. Chancellor Rachel Reeves’ budget has created turbulence, with market participants judging what it would do to the UK economy and Pound Sterling. The budget's implications, combined with inflation concerns, are crucial factors in the Pound Sterling's recent performance.