**GBP/USD Price Forecast: Pound Sinks to 1.3097 as UK Fiscal Gaps Hit Sterling after Market Close**
*By TradingNews Editorial Team*
**Key Takeaways:**
– GBP/USD slides below key 1.3100 level amid post-market volatility.
– UK fiscal policy concerns and lingering economic uncertainty unsettle sterling.
– Focus shifts to upcoming economic data and Bank of England policy signals.
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**Introduction**
The British pound continued its slide against the US dollar after the European session closed, with the GBP/USD pair retreating to 1.3097. This significant movement reflects a confluence of factors, with fiscal concerns taking center stage, leading to heightened market uncertainty and volatility.
In this extensive forecast based on the reporting from TradingNews.com (original article: “GBP/USD Price Forecast: Pound Sinks to 1.3097 as UK Fiscal Gaps Hit Sterling after Market Close”), we delve into the core drivers behind sterling’s tumbling performance, analyze recent technical and fundamental developments, and look ahead to what could shape GBP/USD in the near- and medium-term future.
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**Sterling’s Descent: Context and Immediate Drivers**
After experiencing relatively stable trading throughout most of the day, sterling’s late-session tumble came in the wake of fresh concerns over the UK’s fiscal outlook. Investors responded to reports of significant gaps in the upcoming UK fiscal plans, even as confidence in the government’s ability to manage both growth and fiscal sustainability remains fragile.
*Immediate catalysts for the pound’s decline include:*
– *Concerns about the persistence of UK fiscal deficits* emerging from government hints and leaks regarding upcoming budget plans.
– *Limited progress in addressing medium-term financial imbalances*, which raises the risk premium on UK assets.
– *US dollar resurgence* as risk appetite waned globally, driving markets toward the haven currency.
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**Breakdown of UK Fiscal Concerns**
The UK government faces increased scrutiny over its budget outlook, which has tangible impacts on market sentiment and currency valuation.
*Key points pressing on the pound are:*
– *Persistent deficits*: Recent budget analyses have pointed toward an enduring gap between spending and revenue, exacerbated by higher public sector wage demands, stubborn energy subsidies, and uncertainty on future tax receipts.
– *Lack of targeted spending cuts*: The absence of clear signals on spending restraint has eroded confidence, as markets now believe that fiscal pressure may persist into subsequent years.
– *Challenges in raising tax revenue*: A combination of sluggish growth and limited political appetite for new tax increases leaves policymakers with fewer options.
Market participants have extrapolated these signals into expectations of increased government borrowing. This, in turn, elevates the yields required on UK sovereign debt, putting further downward pressure on sterling as foreign investors demand a higher risk premium.
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**Technical Analysis of GBP/USD**
The technical landscape for GBP/USD has shifted dramatically following the sterling’s latest drop.
*Technical observations include:*
– *Break below psychological support*: The breach of the 1.3100 level is technically significant, with the pair closing in on key moving averages—particularly the 50-day MA.
– *Momentum indicators turning bearish*: Relative Strength Index (RSI) has flipped from neutral to negative territory, suggesting increased selling pressure could persist in the short run.
– *Potential targets*: Failure to reclaim 1.3120 resistance could see GBP/USD targeting 1.3030 and, below that, the 1.2980 area.
The inability of the pound to hold its previous gains, especially in the context of heightened risk aversion, brings additional volatility into the forecast.
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**Broader Market Dynamics**
The UK’s fiscal issues are not occurring in isolation. Macro volatility continues to shape currency market sentiment, with global risk appetite swinging wildly amid evolving headlines.
*Key influencing factors include:*
– *US Federal Reserve policy*: The US dollar has benefited as investors anticipate prolonged higher US rates, which dulls demand for riskier currencies.
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