The GBP to USD (GBPUSD) rally accelerated in overnight trading even after a dire warning from Rishi Sunak. The pair rose to a high of 1.3396, which is just four pips below the psychological-important level of 1.3400.
In his spending review speech yesterday, Rishi Sunak warned that the UK faces an economic emergency as it continues to address the ongoing Covid-19 pandemic. The government also forecasted that the economy will be 11.3% smaller this year than before the pandemic. That makes it the sharpest contraction in almost 300 years. Notably, the economy is not expected to recover until 2023.
In his speech, he said that the government will slash foreign aid to 0.5% and order a pay freeze for people working in the public sector. Most importantly, the government announced £55 billion in pandemic response.
The GBPUSD rallied because analysts were already anticipating these measures. Also, the relatively weaker US dollar contributed to the strength. Indeed, the dollar index has dropped to the lowest level since September.
Turning to the three-hour chart, we see that the GBPUSD price fell to a low of 1.3300 yesterday. This price was along the lower ascending trendline that connects the lowest levels this year. The uptrend is also being supported by the 25-day and 15-day moving averages. Most importantly, the pair is forming a double top pattern.
Therefore, a move above 1.3400 will mean that bulls are in control, which will see it continue rising. At the same time, a move below the ascending trendline will invalidate this trend.
