2020.07.0815:28:00UTC+00Pound Rises To Multi-week High Against U.S. Dollar Amid Sunak's Mini Budget

The pound climbed to a multi-week high against the U.S. dollar in the New York session on Wednesday, after U.K. Chancellor Rishi Sunak unveiled ?30 billion budget in parliament to protect the economy from a steep downturn in the wake of coronavirus crisis.

In his summer statement, Sunak announced a stamp duty cut in England and Wales for this financial year. The homebuyers will be exempted to pay stamp duty, if purchases are less than ?500,000 until March 31.

The government will slash VAT in hospitality and leisure businesses to 5 percent from 20 percent until next January, he told.

Sunak announced a new job retention policy, with employers being paid ?1,000 per employee taken back from furlough and kept until January.

The currency dropped in the European session after German Chancellor Angela Merkel warned that the European Union should prepare for a possibility of a no-deal Brexit and rising Covid-19 cases in some parts of the world dampened risk sentiment.

The progress in Brexit negotiations has been slim despite accelerated efforts from both sides, Merkel said in a speech to European Parliament lawmakers in Brussels.

"I will continue to push for a good solution but we should also prepare for a possibility of a no-deal scenario," Merkel added.

Sentiment dampened after the U.S. coronavirus outbreak crossed a grim milestone of over 3 million confirmed cases and the World Health Organization acknowledged "evidence emerging" that the coronavirus can be transmitted through the air.

The pound approached 1.2601 against the greenback, setting a new 3-week high. On the upside, 1.28 is possibly seen as the next resistance level for the pound.

The pound rose to a new 3-week high of 135.43 against the yen, from a low of 134.58 hit at 5:30 am ET. The pound is seen finding resistance around the 137.00 level.

The pound recovered to 1.1825 against the franc, after falling to 1.1782 at 5:15 am ET. The next possible resistance for the pound is seen around the 1.22 level.

In contrast, the pound dropped against the euro and was trading at 0.8997. The pound is likely to challenge support around the 0.91 level.

Looking ahead, U.S. consumer credit for May is due in the New York session.