- The GBP/USD pair is holding steady ahead of the UK spending review speech by Rishi Sunak.
- The speech comes at a time when UK public debt is soaring.
- The pair will also react to important economic data from the US, including GDP and FOMC minutes.
The British pound is holding steady ahead of the UK spending review by Rishi Sunak. The GBP/USD is trading at 1.3357, which is close to the highest point in September.
UK spending review
Rishi Sunak, the Chancellor of the Exchequer will deliver a major speech in parliament today afternoon. In this speech, he will provide government’s budget for the 2021-2022 financial year. He will also provide economic forecasts for the measures he has already announced this year.
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Economists expect the chancellor to provide more financial resources to the public sector departments like schools and military. Analysts at the Resolution Foundation see the allocation to public spending rising from 40% to 60%, a significant jump.
The UK spending review comes at a difficult time for the country. The unemployment rate has soared because of the pandemic while more companies are going out of business. The travel and hospitality industries have also been decimated, with top employers like Rolls-Royce and Meggitt announcing major layoffs.
At the same time, UK public debt has continued to rise. In a recent report, the Office of National Statistics (ONS) said that the government borrowed more than £260.8 billion between April and October to finance programs like the furlough scheme. As a result, the public sector debt to more than £2.07 trillion, larger than the country’s GDP.
Worse, the economy will continue shrinking in the next few years. In 2025, it will be 3% than it is today, partly because of Brexit, which means that the public sector will keep borrowing more than £100 billion.
The GBP/USD will also react to the happenings in the United States. Later today, the US statistics agencies will release the second reading of the country’s performance in the third quarter. Economists expect the data to show that the economy expanded by 33.2%.
The bureau will also release the durable goods orders, initial jobless claims, consumer spending, and wholesale inventories. Later on, the Fed will release the minutes of the previous meeting.
GBP/USD technical outlook
The four-hour chart shows that the GBP/USD has been on a strong upward trend since October, when it reached a low of 1.2674. Today, the pair is trading at 1.3358, which is above the 78.6% Fibonacci retracement level. It is also above the 50-day and 25-day weighted moving averages and the ascending red trendline.
These, as you will find in our free forex course, are signs that bulls are in control, which means that the upward trend will continue. If it does, the next resistance level will be at 1.3400, which is a strong psychological level.