British Pound (GBP): Would The UK Tax Cut Prospect Be Abandoned? | Crude Oil Up
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In this article:
- British Pound and the UK
- Crude Oil
Sterling rebounds after change in government tax plans
GBP is one of top performing G10 currencies after the BBC reported that the Truss government may drop the idea of tax cut for high earners as a result of party insider backlash. Tory MPs rebelled against UK Prime Minister Truss, threatening they wouldn't vote on a planned cut to 45% tax rate until sources of financing are presented in the next budget (November 23, 2022). However, the report from the BBC hints that the whole idea of a tax cut for high earners may be dropped. The u turn had been inevitable given the market reaction but there's every likelihood this will buy the UK government time politically but not necessarily from investors. The 45p tax cut has taken around £2billion off extra borrowing. That's it. The UK government is facing extra borrowing of closer to £150bn and at higher interest rates than in the past decade. GBPUSD pair is trading at a 2-week high and above levels from the 'mini-budget' announcement that triggered a slump in GBP and UK bonds. Until investors get clarity in the scale of borrowing needed and costs, which means a detailed OBR forecast, the pound Sterling volatility will likely continue.
Oil starts the week higher as traders await OPEC production cut
Oil started the week positively by posting noticeable gains today with both Brent and WTI trading around 4% higher after several weeks of uncertainty and volatility. The upward move was probably triggered by media reports suggesting that OPEC+ may decide to implement a significant output cut during the meeting this week (October 5, 2022). Many in the media believe the cut would involve a 1 million barrel reduction in daily production with some even suggesting that a 1.5 million barrel cut may be on the table. OIL.WTI broke through a downward trendline and climbed back above the $81.00-81.60 resistance area despite being in a downward trend for over a month. After a successful retest of the zone, a strong upward impulse was launched this morning with the price reaching $83 per barrel for the first time in more than a week. While the situation remains volatile, traders will be anxiously awaiting this week's OPEC+ decision as a surprise in the decision could cause a significant move on the oil market while if the group decides to act in line with expectations we could be seeing a continuation of the recovery.
