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GBP/USD Bounces to 50-day SMA
Sterling traded extremely well on the back of the Federal Reserve’s monetary policy announcement but like U.K. Chancellor Osborne, the Bank of England could warn of the economic instability that would transpire if Britain leaves the European Union. Osborne rolled out sweeping changes in taxes as a way to boost growth. This includes a cut in corporate taxes and a new sugar tax on soft drinks. They also lowered the GDP forecast from 2.4% to 2%. This morning’s U.K. employment numbers were better than expected with the claimant count rate falling and average weekly earnings rising. Since February we’ve seen both improvements and deterioration in the U.K. data so the Bank of England is likely to keep their overall view on the economy unchanged.
Technically today’s rally in GBP/USD has taken the pair back towards the 50-day SMA which is the main level of resistance. If GBP/USD breaks above 1.4320, the next stop will be 1.4400. However if it fails at the SMA, a move back to 1.4050 is likely.