Expected debt ceiling agreement contributes to British pound decline

The GBP/USD encounters a resistance level at 1.2440

By Raed Alkhedr | @raedalkhedr | 31 May 2023

GBPUSD 5-31-2023
  • Today is the vote on the legislation aimed at raising the US debt ceiling of $31.4 trillion

  • The British pound started the day with significant declines against the US dollar

  • The primary support levels for the pound are situated at 1.2280

The most influential economic events impacting the British pound against the US dollar

After the US dollar experienced a surge following an agreement reached on the debt ceiling crisis, the British pound began the week with a substantial increase. This surge was fueled by reports indicating the persistent opposition of certain Republican Congress members to the agreement between the US President and the House Speaker. To address this issue, the House Rules Committee in the US Congress has approved legislation aimed at raising the US debt ceiling to $31.4 trillion. The legislation has been forwarded to the House for a vote, scheduled for today. The committee voted in favor of the bill with a margin of seven to six, effectively suspending the debt ceiling until January 1, 2025.

If the bill receives approval in the House, it will then be sent to the Senate for discussion and a vote. Both houses of Congress must consent to the legislation before June 5. In the trading market, the British pound experienced a slight decline against the US dollar at the beginning of the day, with the currency pair trading close to the $1.2370 level.

Technical and pivotal levels affecting British pound movements

The GBP/USD pair initially rose during the beginning of the week, testing the resistance level at 1.2440. However, it was unable to break through and subsequently retreated, trading around the 1.2360 level. There is a possibility that the ongoing decline may continue, leading to a test of the main support level for the pair around 1.2280. If this support level is breached, it may contribute to a further decline, potentially testing the subsequent support level at 1.2190.

the pair is currently moving in a bearish direction in the short and medium term, indicating a likelihood of continued decline. Nevertheless, if the pair manages to successfully break through the resistance level at 1.2440, the direction may shift to a bullish trend. This would increase the chances of an upward movement, with potential tests of the resistance levels at 1.2500 and 1.2550.

GBPUSD 5-31-2023