GBP/USD near 1.3200, fails to recover after UK tax cuts and CPI data

• UK Chancellor of the Exchequer Rishi Sunak’s announcement of further tax cuts has not given sterling a lasting boost.
• GBP/USD remains weak near the 1.3200 level after hot UK CPI failed to lift the pound either.

While the latest fiscal policy announcement from the UK Chancellor of the Exchequer will certainly cheer up the British public, it has done little to cheer up the British pound, which continues to underperform against most G10 currencies. Foreign Minister Rishi Sunak’s announcement of a reduction in the tax on fuels, an increase in the tax-free earnings threshold, a slight reduction in the tax rate for the lower bracket and new support for businessesseemed unimpressed by forex market participants.

The pair GBP/USD remains weak near the 1.3200 level, broadly in line with its levels before the spring statement, with investors apparently still of the opinion that new policies will do little to improve the rather dim outlook for the UK economy. That suggests that the BoE is likely to stick to its new dovish line that only modest additional monetary tightening “might” be appropriate in the coming months.

At current levels around 1.3200, the GBP/USD is trading with losses of around 60 pips or -0.43 on the day, with the British pound also failing to gain momentum from higher-than-expected UK CPI consumer price inflation figures. UK headline inflation hit its highest level in 30 years, reaching 6.2% in February, more than expected. Attention now turns to comments from BoE Governor Andrew Bailey, who is due to appear at a summit later in the day.