The GBPUSD pair jumped higher after the Chancellor Jeremy Hunt announced that almost all of the tax cuts set out in the mini-Budget are being reversed, a move intended to restore credibility and ease market turmoil. The basic rate of income tax will be left unchanged at 20% indefinitely until circumstances allow it to be cut and the energy price guarantee will not change between now and April next year. Before the weekend, GBPUSD plunged over 1% after Finance Minister Kwasi Kwarteng was dismissed and Truss failed to convince investors that the government would dial back its controversial fiscal stance significantly. The Bank of England’s emergency bond-buying scheme also ended on Friday as previously announced. Still, the PM announced on Friday that corporation tax will increase to 25% next year from the current 19%, according to plans of previous chancellor Rishi Sunak, which will end up raising £18 billion per year.
From a technical point of view, despite upbeat momentum, the pair struggles to break above major resistance at 1.2990, which is marked with 23.6% Fibonacci retracement of the last downward wave and upper limit of the triangle formation. As long as the price sits below, another downward impulse may be launched towards local support at 1.0930 which is marked with previous price reactions. On the other hand, if buyers manage to push the price higher, then the next major resistance to watch lies at `1.1870 and is marked by 38.2% retracement.
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GBPUSD, D1 interval. Source: xStation5
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