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GBP/USD rises ahead of the Budget

GBP/USD is rising for a fifth Consecutive session amid U.S. dollar weakness and ahead of Chancellor Rachel Reeves' autumn budget, where she aims to retain the confidence of the bond market and voters.

After a sharp U-turn on rising income tax, Reeves is expected to unveil a range of tax increases to fill a £30 billion funding gap and to provide herself more headroom.  The OBR forecasts will also be scrutinized for the trajectory of the UK economy. If the outlook is weak, the pound could fall sharply.

The budget comes as recent data highlighted the challenges she faces, including record-high borrowing outside the pandemic, stalling business activity, and sharply falling retail sales as consumer sentiment weakened.

The bond market will be watching closely to see whether her fiscal plan is credible and what impact it could have on inflation. Reeve’s last Budget added inflationary pressures to the economy; however, the Chancellor has said she will look to bring inflation down this time.

Any signs of slower growth and cooling inflation expectations could add to expectations of a BoE rate cut and pull GBP lower. The market is currently pricing in an 80% chance of a BoE rate cut in December.

The USD is falling further on rising expectations that the Federal Reserve will cut interest rates in December. Weaker-than-expected US retail sales, consumer confidence, and cooler PPI data support the view that the Fed could reduce rates by 25 basis points next month.

Attention is on US durable goods and weekly jobless claims for further clues on the health of the US economy. With Thanksgiving tomorrow, volumes could be low.
 

GBP/USD forecast – technical analysis

GBP/USD fell from 1.3725 on September 17 to a low of 1.30 on November 5. The price recovered from this support and is testing resistance at 1.32, the falling trendline, and the November 13 high. The 50 SMA is crossing below the 200 SMA in a death cross bearish signal.

Should the price face rejection at 1.32, support is seen at 1.31 and 1.30. A break below here could spur a deeper selloff towards 1.27.

Should buyers break above 1.32 this exposes the 200 SMA at 1.33. A rise above 1.3350 puts the pair on more stable ground.

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Oil falls to a 5-week low on Ukraine-Russia peace hopes

Oil prices fell to $58 on Wednesday, around a five-week low, pressured by signs that the Ukraine-Russia peace agreement may be approaching, which could lead to sanctions on Russia being lifted.

President Trump said the negotiations were nearly complete with just a few remaining issues, while Ukraine's top aide in Geneva said the talks had a promising start.

Should Russia and Ukraine reach a peace agreement, sanctions on Russia, a major oil supplier, could be lifted, potentially boosting supply and intensifying concerns over a supply glut next year, where production continues to outpace consumption.

US crude oil inventories fell by 1.9 million barrels last week, marking the first draw after three consecutive weekly gains.

EIA oil inventories are due later today.
 

Oil forecast – technical analysis

Oil continues to trade in a descending channel dating back to early July. The price faced rejection at the 50 SMA and is being guided lower by this dynamic resistance, dropping to a monthly low of 57.10. The RSI is below 50.

Sellers will look to extend the downward trend towards 56.00, the October low ahead of 55.00, the 2025 low.

Any recovery higher would need to rise above 60.00, the round number, and 60.50, the 50 SMA. A rise above 62.75 creates a higher high and exposes the 200 SMA at 64.22 and 65.00.
 

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