GBP/USD: Watch budget - OCBC

Chancellor Reeves said there would be new rules in her budget governing Treasury borrowing, allowing debt levels to increase by up to £50bn over 5 years - to facilitate investment in Britain's infrastructure. GBP was last seen at 1.30 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

BoE can become a 'bit more aggressive'

"There were concerns if her plans would be similar to former PM Liz Truss's infamous mini-budget in 2022 although Reeves was quick to preempt in saying that she would stick firmly to a requirement for day-to-day spending to be matched by tax receipts. Increase in borrowings may keep rates elevated for longer."

"This suggests that the BoE may not have much room to lower rates, which may run in contrast to Governor Bailey's recent dovish shift in rhetoric, in which he said that BoE could become a 'bit more aggressive' and 'a bit more activist' in its approach to cutting rates if the news on inflation continued to be good (Telegraph interview)." "Bearish momentum on daily chart shows signs of fading while RSI shows rose from near oversold conditions. Resistance at 1.3040 (21 DMA), 1.3110 (38.2% fibo retracement from Sep high to Oct low). Support at 1.2975 (100 DMA), 1.2910 (recent low)."