Dollar Static, Sterling Gains After U.K. Government’s Tax U-Turn
03 Oct 2022
US Dollar Index is trading up 0.21% at 112.32
The U.S. dollar edged higher in early European trading Monday, while sterling also gained after the U.K. government agreed to water down its plans for unfunded tax cuts.
At 02:45 ET (06:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, edged higher to 112.13, close to the one-week low of 111.64 seen late last week.
GBP/USD climbed 0.3% to 1.1188 after the British government decided to reverse the proposed scrapping of the highest rate of income tax, a plan that has been widely criticized in the governing Conservative Party as well as the country as a whole.
New Finance Minister Kwasi Kwarteng announced his plan to substantially cut taxes, including the 45p highest rate of income tax, as part of a mini-budget on Sept. 23.
The need for vast government borrowing to pay for the plan resulted in the value of the pound and government bonds slumping dramatically.
Prime Minister Liz Truss attempted to defend the plan in the press over the weekend, but her pleas didn’t work with several senior lawmakers voicing their opposition to the policy at the party’s annual conference which began on Sunday.
“We get it, and we have listened,” Kwarteng said Monday, confirming that the abolition of the 45p tax rate will not go ahead.
Elsewhere, EUR/USD fell 0.1% to 0.9796, after an escalation of the region’s energy crisis, with Russian energy Gazprom (MCX:GAZP) freezing its gas flows to Italy over the weekend.
On technical fronts US Dollar Index:RSI stood at 65.66 and currently it is trading above all MA. So, BUY position can be taken with following target and stoploss: