GBP/USD: Potential new taxes in the UK budget to cap any recovery

GBP/USD has been on the back foot as the dollar strengthens alongside rising yields and bubble concerns. Yohay Elam, an Analyst at FXStreet, explains why bears are set to remain in control for at least one more day.

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Key quotes

“The reason that investors continue to shy away from US debt stems mostly from the Federal Reserve's Laissez-Faire approach – it is more worried about ten million unemployed Americans than about prospects for inflation.”

“Lael Brainard, Governor at the Fed, speaks later in the day and she is unlikely to express concerns about rising long-term borrowing costs.”.

“Sterling bulls are also on standby ahead of the UK budget presentation on Wednesday. Chancellor of the Exchequer Rishi Sunak is set to lay out new economic forecasts and potentially corporate tax hikes. Concerns that businesses would struggle with higher costs will probably continue weighing on sterling, at least until the full details are out. Uncertainty hamstrings the pound.” 

“Support awaits at the daily low of 1.3860, followed by 1.3830 and 1.3775, which played a role in mid-February, on the way up.”

“Resistance awaits at 1.3930, where the 100 SMA hits the price, followed by the psychologically significant 1.40 level.”