Chancellor of the Exchequer Jeremy Hunt presenting the Spring Budget
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Sterling bolstered by weak dollar, brighter Budget

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The British pound broke above the 1.2700 barrier against the US dollar and traded around 1.2735 in Asian trading on Thursday, with the uptick bolstered by a weaker USD and encouraging news from the UK Spring Budget.

The Federal Reserve Chair Jerome Powell told House lawmakers on Wednesday that interest rates might start coming down this year, but also cautioned that the Fed would take its time until the U.S. central bank gains greater confidence that inflation is moving sustainably toward the 2% target.

Powell’s comment indicated that the Fed officials remain cautious about not losing the progress made against inflation, and the decision-making will be based on incoming data.

About the data, the US JOLTS job openings fell to 8.863 mln in January from the previous reading of 9.026 mln, below the market consensus of 8.900 mln. The ADP private sector employment climbed 140,000 in February, from 111,000 in January, weaker than the market expectation of 150,000.

Spring Budget

Chancellor of the Exchequer Jeremy Hunt presented the spring budget to the House of Commons, telling MPs that the UK economy has dealt with the financial crisis, the pandemic, and the energy crisis caused by the war in Europe.

He added that interest rates will remain high as the Bank of England tries to bring down inflation.

Hunt also said the UK economy is estimated to grow by 0.8% in 2024 and 1.9% in 2025, stronger than the 0.7% and 1.4% growth rates forecast by the Office for Budget Responsibility in November.

That said, the encouraging comments and the high-for-longer rate narrative in the UK lifted the Pound Sterling and acted as a tailwind for the GBP/USD pair.

Across the pond, the U.S. weekly Initial Jobless Claims and Trade Balance are due on Thursday.

Investors will also take more cues from the second testimony by Chair Powell and Fed’s Mester speech later in the day. On Friday, attention will shift to US non-farm payrolls (NFP), which is projected to see 200,000 job additions in February from the previous reading of 353,000.

(Source: OANDA)