The UK's £40 Billion Budget: What Does it Mean For GBP Traders?

30 oct.

For traders following GBP/USD and GBP/EUR, today’s UK budget rollout might be impactful. The Labour government’s plan introduces a £40 billion tax increase and invests in infrastructure—moves that could shape the pound’s trajectory. While the fiscal measures aim to strengthen public finances, they may exert near-term pressure on GBP, potentially affecting growth rates. Watching these shifts will be key for traders.

GBP/USD Potential
Historically, GBP/USD has been sensitive to fiscal news, and today’s budget may stir some extra volatility. Currently, GBP/USD sits around key support at 1.30—a level it’s held onto in recent dips. Should today’s announcements apply downside pressure, GBP/USD could test support around 1.28, with 1.25 being the next significant marker. On the upside, if the market views these tax increases as beneficial for stability, the pair might target 1.3150 resistance. Strong consumer or growth data could provide further support toward this level, but breaking above it may require more robust economic updates.

GBP/EUR Potential
With GBP/EUR, there’s a bit of a balancing act at play. While tax hikes could weigh on GBP, ongoing eurozone challenges might stabilise the pair. GBP/EUR remains in a defined range, with support around 1.14 and resistance at 1.16. Any shifts in ECB policy—especially if hawkish—could nudge the euro higher, influencing the pair’s movement.

Macro & Technical Balancing Act
On a broader scale, the Bank of England’s rate path will be essential here. If rates rise to keep inflation in check, this could add support for GBP. However, tax hikes could dampen consumer demand, potentially easing pressure on the BoE for further rate hikes in the short term.

In summary, today’s budget introduces potential volatility for GBP/USD and GBP/EUR. Watching 1.28 or 1.3150 on GBP/USD, and the range in GBP/EUR, will provide useful signals. With both the BoE and ECB in play, staying tuned to macro updates and watching price action around key levels could help traders stay ahead.

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