GBP/USD pauses ahead of Rishi Sunak annual budget speech
- The GBP/USD is holding steady ahead of Rishi Sunak budget speech.
- The pair is also reacting to the latest UK services PMI data.
- The services PMI rose to 49.5, missing estimates.
The GBP/USD is in a tight range after the relatively weak UK services PMI numbers and the UK annual budget speech by Rishi Sunak.
UK services sector struggling
The UK is mostly a services economy. The sector employs more than 70% of all workers, according to the Office of National Statistics (ONS). Sadly, the industry has been the worst affected by the coronavirus pandemic.
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On Monday, data from the country revealed that the manufacturing PMI increased from 54.9 to 55.1. Today, the numbers from Markit revealed that the services PMI increased from 39.5 in January to 49.5 in February. Analysts were expecting the PMI to increase to about 49.7. Also, the number has been below the expansionary zone of 50 since October last year. In the report, Tim Moore said:
“UK service sector activity was relatively stable in February and so it appears that the third national lockdown has seen limited spillovers to parts of the economy beyond the scope of government-mandated closures”
Still, analysts expect that the sector will continue to expand as the government ramps-up vaccinations.
The GBP/USD also held steady ahead of a speech by Rishi Sunak, the Chancellor of the Exchequer. According to media reports, he is expected to extend the furlough program and provide more support to high street retailers. Also, he is expected to increase corporate taxes from 19% to 23% and freeze the stamp duty until end of June.
Still, analysts at Rabobank don’t expect his speech to have an impact on the GBP/USD. They wrote:
“While this suggests room for a ‘sell on the fact’ reaction in GBP today, assuming that fiscal policy settings remain extremely accommodative, any such reaction is unlikely to extend too far in the near-term.”
Meanwhile, the GBP/USD is wavering a the US dollar rises. The dollar index has risen by 0.15%, with the currency rising by 0.35% against the Japanese yen and Swiss franc.
The GBP/USD is trading at 1.3950, which is slightly below the intraday high of 1.400. On the four-hour chart, the price is slightly below the first support of the Andrews pitchfork tool. This is a sign that the pair has not had a bullish breakout yet. Further, the price is along the 25-period and 15-period exponential moving averages. Therefore, while a bullish breakout is possible, forex investors will need to clear the resistance at 1.400 first.