British pound price action settings: GBP/USD, EUR/GBP, GBP/JPY

British Pound (GBP/USD, EUR/GBP, GBP/JPY) Analysis

• Fiscal deficit reduction reignites demands for policy cuts ahead of 2024 election campaign
• UK PMI data could further strengthen EUR/GBP’s downward trend ahead of tomorrow’s release
• Despite easing from the Bank of Japan, GBP/JPY tires before major bullish hurdle
• Download the latest Q1 lb The pound forecast is as follows.

Reduction in budget deficit reignites demands for tax cuts ahead of 2024 election campaign

A lower-than-expected budget deficit of £7.77bn was recorded in December, the Office for National Statistics announced today, the lowest budget deficit since 2020, and further room for tax cuts ahead of the 2024 general election. It was reported that it had spread.

In a statement last autumn, Chancellor of the Exchequer Jeremy Hunt announced a number of measures to boost growth, but at the time he announced his own support for a larger and more impactful spring break for taxpayers. appeared to have chosen to leave the argument dry. Political commentators have suggested that the tax cuts could be seen as a way for the unpopular Conservative government (according to opinion polls) to regain lost ground from Labor. If tax cuts are implemented responsibly, the cost of living crisis will be further eased, as fuel and energy costs are already significantly lower.

The date for the general election has not yet been announced, but it is likely to be held towards the end of the year.

Voting intentions in the UK from July 2017 to January 2024 (General Election)

Source: Bureau of Statistics

GBP/USD marginally higher as market awaits important US data

The cable continues its general uptrend, which suggests it will find resistance at 1.2736, with a longer upper core seen on the daily candlestick chart alongside today’s price action, similar to previous scenario is revealed.

The pair has been on a slow decline, but the price movement is broadly contained within the trading channel highlighted in orange. While the 50-day simple moving average appears to support the dynamics of this pair, the overall momentum appears to be fading according to the MACD indicator.

If the US economy grows faster than expected in the final quarter of 2023, when US GDP statistics are released on Thursday, the signs of fatigue identified at 1.2736 could become a weekly ceiling. Additionally, the Fed’s preferred measure of inflation (PCE) is expected to be released on Friday, and a hotter-than-expected result could be expected given the recent rise in December price data across developed markets. The US dollar may rise further, weighing on GBP/USD. Dynamic support at the 50 SMA may come into view, followed by him at 1.2585. So far, economic indicators have proven ineffective in moving price movements out of the current range.

GBP/USD daily chart

Source: TradingView, Author richard snow

UK PMI data could further accelerate EUR/GBP downtrend ahead of tomorrow’s release

EUR/GBP has revealed early signs of a bearish move outside the existing triangle pattern. The pair has closed below the uptrend line multiple times, which previously acted as support, and could be pushed higher if EU PMI data released tomorrow morning remains inferior to UK data. there is.

Although the UK’s composite PMI data has moved into expansion territory (>50), the EU equivalent is still in contraction, with a continuing downward trend due to weakness in the manufacturing sector in particular.

If the bearish momentum continues, the next support zone will appear at 0.8515. This zone is the one that captured Loews in June, July, August, and September of 2023. Resistance appears at the support of the previous trend line and continues at 0.8635, where the 200 SMA currently resides. .

EUR/GBP daily chart

Source: TradingView, Author richard snow

Despite easing from the Bank of Japan, GBP/JPY fatigues ahead of major bullish hurdle

GBP/JPY is trading sideways as London morning trading closes, but as a result of the Bank of Japan’s (BOJ) decision, the price action rose around 188.80, but fell to 187.35 earlier in the day. , this doesn’t tell the whole story. Do not change policy settings.

As far as the pound is concerned, the pound has remained relatively strong, with the yen under pressure as expectations of an imminent interest rate hike by the Bank of Japan have cooled due to a subsequent drop in inflation, and the pound/yen pair has been under pressure. shows the most room for upside.

In addition to monetary policy decisions, the Bank of Japan also produces quarterly economic forecasts, projecting inflation in 2024 to be around 1.9%, just short of the 2% target, with all significant interest rate hikes still to materialize. I’m holding out hope that it might. If the incoming data suggests that prices will rise above this key level for an extended period of time.

188.80 represents a significant level of resistance and is likely to pose a challenge for the bullish momentum to continue. Speaking of momentum, the MACD indicator continues to support upward price action, but interestingly the RSI is very close to overbought territory, suggesting that a modest decline may be in order. I am. The decline thus far has been relatively short-lived, proving that the fundamentals are working. While the pound attracts good yields, Japan has seen its currency depreciate significantly. Support lies far below at 184.00, which coincides with the 50-day simple moving average (blue line).

GBP/JPY daily chart

Source: TradingView, Author richard snow

The Forex market is a combination of a range market and a trend market, depending on where you look. Read the guide below to arm yourself with the knowledge to trade both of these market conditions with confidence.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnow