• The GBP/USD price stays positive above 1.3100, awaiting the UK budget.
• The UK government faces a strong challenge to balance between growth and fiscal deficit.
• Markets eye Fed comments and US PPI ahead of Wednesday’s UK budget.

The GBP/USD price trades above 1.3100 on Tuesday, broadly unchanged as investors stay focused on Wednesday’s UK Autumn Budget. The pair struggled to establish a directional bias as the pound remains trapped between the Bank of England’s potential easing and uncertainty surrounding the government’s consolidation plan. A firm dollar amid safe-haven flows keeps the GBP/USD upside in check ahead of the budget.

Markets are keenly focusing on the estimated £20 billion structural deficit. The gap demands politically difficult decisions. UK Chancellor Rachel Reeves has reportedly stepped back from an income tax hike and instead expects to rely on a mix of stealth taxes, including an extended threshold freeze, tighter rules on salary, higher asset and property taxes, and selective sector-based levies.

This approach respects the manifesto pledge to safeguard the working class from additional taxes. However, the patchwork has triggered skepticism in the market. Gilt yields have already swung sharply after reports of a shift in tax plans, increasing the doubts over credibility.

Investors are also awaiting an updated forecast from the Office for Budget Responsibility. Weaker growth leaves little room for optimism, and any downgrade in the outlook would result in weaker tax collection and a greater need for consolidation. Political uncertainty also compounds risk, with policy U-turns and soft polling.

Across the Atlantic, dovish remarks from Christopher Waller, a Fed official, have strengthened expectations of a December rate cut, with the labor market being the key concern, not inflation. Futures imply an 81% probability of a 25-basis-point rate cut now, compared to 31% last week. However, the Fed will be forced to act without the fresh labor data, which will be available near mid-December.
 

GBP/USD Key Events Ahead

With the US entering Thanksgiving week and liquidity thinning, Cable could stay in a tight range. However, Wednesday’s budget is expected to set the tone for the year-end. Today, markets will be watching the US PPI data, which could lead to short-term market volatility.
 

GBP/USD Technical Price Analysis: Bulls Need a 50-MA Breakout
 

(Click on image to enlarge)

GBP/USD 4-hour chart
 

The GBP/USD 4-hour chart shows a mild upside momentum during the earlier London session. The price has jumped up to the 50-period MA near 1.3125. A sustained breakout could attempt to test the orderblock zone near 1.3180 ahead of the 200-period MA around 1.3220.

On the other hand, falling below the 1.3100 mark could attract sellers and push the price towards the 1.3050 level ahead of 1.3000. However, the RSI remains slightly above the 50.0 mark, indicating a mild upside.

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