**GBP/USD Price Forecast: Pound Sinks to 1.3097 as UK Fiscal Gaps Hit Sterling after Market Close**
*By [Original Author, as per TradingNews.com]*
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The British Pound (GBP) experienced one of its most challenging sessions of the quarter, sharply declining against the US Dollar (USD) and reaching lows not seen in recent weeks. As global markets digested the evolving narrative surrounding the United Kingdom’s fiscal position, the GBP/USD currency pair tumbled to 1.3097 following official reports highlighting widening fiscal gaps. These developments have left traders and investors recalibrating expectations for the Pound’s near-term trajectory.
This in-depth analysis examines the recent price action, outlines the key catalysts that accelerated downside momentum in GBP/USD, and presents potential scenarios for forex traders. Insights into monetary policy, UK fiscal forecasts, and external macroeconomic pressures are explored to provide a comprehensive view for market participants.
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## Recent GBP/USD Price Action
The GBP/USD pair saw a marked reversal in sentiment late in the trading week. Earlier optimism gave way as concerns mounted over the UK’s fiscal health. After oscillating within a relatively narrow range for several sessions, the Pound came under intense selling pressure.
– **Key Price Levels:**
– High of the week near 1.3250
– Intraday drop to 1.3097, lowest since late previous month
– Previous support at 1.3150 decisively broken
– **Volume & Volatility:**
– Increased volume on the downside
– Expansion in volatility indicators
– **Technical Indicators:**
– Relative Strength Index (RSI) moved below neutral 50, reflecting bearish bias
– Moving averages (20 and 50 period) show negative crossovers on the 4H chart
These technical signals coincide with the fundamental developments, adding confirmation to the bearish case.
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## Catalyst: UK Fiscal Position in Focus
The immediate trigger for the Pound’s retreat was the release of new data and projections concerning the UK’s public finances. Reports from the Office for Budget Responsibility (OBR), as well as updated statements from the Treasury, pointed to larger-than-expected fiscal gaps.
– **Highlights from UK Fiscal Reports:**
– Budget deficits projected to widen beyond prior estimates
– Revenue shortfalls apparent, with tax receipts lagging forecasts
– Heightened government borrowing needs through the upcoming fiscal year
– **Factors Driving the Deficit:**
– Increased government expenditure, especially in social programs and energy subsidies
– Slower economic growth constraining revenue
– Higher debt servicing costs resulting from recent rate hikes
The surfacing of these developments after market close meant the initial reaction was delayed, but when Asian markets opened, the impact was swift and severe. Investors re-priced Sterling-denominated assets, further pressuring the currency.
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## Market Reaction and Investor Sentiment
Market participants responded swiftly to the fiscal revelations. The reaction was not limited to forex markets but also extended into government bonds and equities.
– **Bond Markets:**
– UK gilts faced notable selling, particularly intermediate and long durations
– Yields on 10-year notes rose, reflecting both inflation expectations and higher risk premiums
– Widening of the spread versus comparable US Treasuries
– **Stock Market:**
– FTSE 100 fell modestly, but domestically-focused stocks with UK revenue exposure suffered disproportionately
– **Derivative Markets:**
– Increase in risk premium seen in GBP/USD options
– Volatility skew shifted towards downside protection
Overall, sentiment towards the Pound quickly soured. Hedge funds and institutional traders increased net short exposures, according to CFTC data and broker insights.
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## Monetary Policy Context: BoE Caught in a Bind
The fiscal developments add a fresh layer of complexity for the Bank of England (BoE), which is already maneuvering a difficult economic landscape. With inflation still
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