Cable moved away from two-week highs on Tuesday as the greenback recovered ground across the board. The GBP/USD pair climbed to 1.1439 on Monday, its highest level since October 5, as the government continued to fold its mini-budget plan. However, the pair failed to hold above the 1.1400 mark.
At the time of writing, the GBP/USD pair trades at the 1.1320 area, 0.30% below its opening price, after peaking at a daily high of 1.1410 earlier in the session.
Brand new British Chancellor of the Exchequer Jeremy Hunt scrapped most of the tax cuts introduced last month by his predecessor Kwasi Kwarteng and announced that the energy cost support scheme would only run until April with the following revision.
On the data front, investors will keep an eye on U.K. September’s inflation data to be released on Wednesday and its impact on tightening expectations for the next BOE meeting. As the members of the MPC need to regain investor confidence, the broad market consensus is that the interest rate hike will be at least 100 bps, while the swaps markets are pricing a policy rate peak at around 5.75%. No first-tier macroeconomic data will be published this week on the U.S. side.
From a technical perspective, the GBP/USD pair maintains a short-term neutral bias slightly skewed to the upside, as indicators are gathering upward momentum on the daily chart. The RSI stands flat above its midline, while the MACD jumped to positive territory and signals increasing buying interest.
Still, the Cable needs to break above the 1.1495-1.1500 area to improve the short-term outlook and pave the way towards the 1.1550 level and the 1.1600 zone. On the other hand, support levels are seen at the 1.1255 zone and the 1.1200 area ahead of the 20-day SMA, currently at 1.1130.