Important news on the UK budget is ahead, which is likely to affect the actions of the Department of Treasury, especially with regards to coping with problems in the economy. Chancellor of the Exchequer Jeremy Hunt has a clear but far from simple task, that is, to convince markets that he can stabilize public finances without devastatingly damaging public services.
During today's speech, Hunt will certainly talk about the global energy crisis and inflation. Latest data showed that the consumer price index rose 11.1% in October, which is higher than what the Bank of England expected. This increases the likelihood that the central bank will raise interest rates again next month.
If Hunt makes a mistake in his statement, he risks putting the Conservatives and his party back on the path of a crushing defeat in the next election. Nevertheless, he will surely remember both Brexit and the problems that the UK is facing after the signing of the agreement.
According to reports, the EU has begun testing the current UK database that tracks goods moving from the UK to Northern Ireland. If the bloc is satisfied with the system's performance, it could pave the way for an agreement on customs checks in the Irish Sea, which is a major source of tension between the two sides.
At the moment, Hunt and Prime Minister Rishi Sunak want the share of British debt in the economy to be reduced by 2027-2028, a goal that would require savings of about £55 billion. Hunt is expected to lay out plans to achieve this goal with a 60-40 split between spending cuts and tax increases.
Reportedly, the Chancellor plans to announce a new funding program to help people survive the cold winter, insulate homes and upgrade heating equipment as part of a plan to reduce UK energy demand. If it is not as economical as many experts expect, pound may sink, which will be an excellent reason to buy. Otherwise, a positive reaction will be seen.
For now, GBP/USD has halted, so buyers are focused on protecting the support level of 1.1850. They want to breaking through the resistance level of 1.1920 because that will prompt a further rise to 1.2020 and 1.2080. But if pressure returns and sellers take control of 1.1850, the pair will fall to 1.1790 and 1.1740.
As for EUR/USD, risk appetite decreased significantly, but sellers are yet to be active. For further growth, it is necessary to break above 1.0440 as only that will prompt a rise to 1.0480, 1.0525 and 1.0570. If pressure persists, the pair will fall to 1.0350, then to 1.0280 and 1.0220.
