GBP/USD experiences a decline during the North American session on Tuesday, falling more than 0.17% as the Greenback recovers, reaching a three-day high, as indicated by the US Dollar Index. Currently, the pair is trading at 1.3384, having peaked at 1.3417.
GBP/USD experiences a significant decline as the DXY reaches a three-day peak, influenced by a subdued data environment amid the US government shutdown. UK borrowing was reported to be lower than anticipated; however, Reeves suggests potential tax increases and reductions in spending. Market participants prepare for the UK Consumer Price Index; a weaker outcome may reignite speculation regarding Bank of England interest rate reductions.
> Sterling has depreciated below 1.34 as the prospect of fiscal tightening emerges in Britain : The limited economic calendar resulting from the government shutdown in the US has led traders to rely heavily on social media updates or statements from US President Donald Trump. The impending release of the latest Consumer Price Index figures in the US on Friday is contributing to a restrained price action. In the UK, Public Sector Net Borrowing for September amounted to 20.24 billion pounds, which is below the median forecast of a 20.5 billion pounds deficit anticipated by analysts. The UK’s Chancellor Rachel Reeves indicated that she plans to increase taxes and reduce spending in order to stay aligned with her fiscal objectives.
She also seeks to prevent disturbing investors who have significantly increased British borrowing costs. Last week, she expressed a desire for a larger fiscal buffer to navigate the complexities of global financial markets, noting that establishing one in the November 26 budget would necessitate certain trade-offs. Currently, market participants are closely monitoring the upcoming release of UK inflation data scheduled for Wednesday. Forecasts indicate that the CPI is projected to increase from 3.8% to 4% in September; however, any deviation from this expectation may prompt the Bank of England to consider reinitiating its easing cycle.