GBP/USD: Prospects of testing 1.30-1.33 range resistance is building – Westpac

UK’s Spring Statement (Budget Update) set out a solid stance for UK finances whilst supporting cost-of living pressures. In the opinion of economists at Westpac, GBP is likely to remain steady in its recent range.

UK’s public debt edges lower despite Ukraine impacts for projected peak of 95.6% in 2022

“Peak debt to GDP has been lowered to 95.6% in the current 2021-22 tax year from over 97% and down significantly from over 100% projected at the height of the pandemic. The Office for Budget Responsibility also profiles the BoE’s Bank Rate to rise gradually to a peak of almost 1.9% into 3Q 2023 before gliding back to just below 1.25% into 2027.”

“UK Feb inflation data was slightly above consensus at 6.2%, but markets are factoring in the BoE and now OBR projections (peak inflation of 8.7% in 4Q 2022) of much higher levels through this year. Speeches by BoE’s Bailey and Broadbent will now be keenly awaited for any further insight on the potential policy path.” 

“Although OBR projections provided some support to UK Gilts, the impact on GBP/USD was minor and prospect of testing 1.30-1.33 range resistance is building.”