FxWirePro: GBP/USD weakens as fiscal concerns pressures the pound

• GBP/USD slipped lower on Friday as pound attracted selling pressure due  to growing UK fiscal   concerns.

•A government source said on Friday that British finance minister Rachel Reeves has no intention of increasing income tax in her November 26 annual budget, citing an improved fiscal outlook.

•Reeves had been widely expected to abandon Labour’s pre-election pledge and raise income tax rates to plug a budget gap, but the Financial Times reported late Thursday that she has now dropped those plans.

• Reeves will likely need to raise tens of billions of pounds to meet her fiscal goals, and her recent remark that “we will all have to contribute” was interpreted as signaling a possible break from the government’s key election promise by increasing income tax rates.

•Investors reacted negatively at first, sending bond yields up by more than 10 basis points at one stage, while sterling dropped nearly 0.5% against the dollar.

•   Immediate resistance is located at 1.3226(50%fib), any close above will push the pair towards 1.3319(50%fib )

•  Strong support is seen at 1.3119(38.2%fib) and break below could take the pair towards 1.3000(Psychological level).

  Recommendation: Good to sell around 1.3120 , with stop loss of 1.3190 and target price of 1.3000