Massive Deficit Triggers Sell-off in British Pound

The news that the U.K. budget deficit would soar to 90 billion Pounds encouraged selling pressure all day in the GBP USD.

The news that the U.K. budget deficit would soar to 90 billion Pounds encouraged selling pressure all day in the GBP USD. Not only was the deficit a massive amount, but it accounted for 12% of the GDP. The addition of a new 50% tax for high earning individuals added additional selling pressure to the market.

Why the government would create a new tax at a time of economic contraction befuddled traders most of the day and no doubt led them to pile on the short side of the market.

The daily swing chart is ahead of the news at this time having turned down on Monday.  The developing series of lower tops and lower bottoms indicates more downside potential.  The trick to trading the trend is not to panic on retracements.