March 21 (Reuters) - GBP/USD fell on Friday, closing out what has been a soft week as the dollar sees a modest reprieve and 1.3000 has been a bridge too far, while risks are now skewed to the downside as UK budget ahead looms on March 26. The mood music surrounding the UK budget is downbeat. And with talk that Chancellor Reeves is set to reveal the biggest spending cuts since austerity leaves sterling in a precarious position as growth inhibiting measures will provide a further headwind to the already anaemic growth.

Though the recent Bank of England decision was a touch more hawkish than expected the impact on sterling was negligible, given that the meeting ultimately did not move the needle for the rate outlook. The central bank is still expected to deliver a rate cut at the May meeting. Next week, BoE Governor Andrew Bailey will deliver a speech, however, with the backdrop of heightened economic uncertainty, data will matter more in guiding policy. That said, the door is open for cable to retest the 200-day moving average at 1.2790-1.2800. Topside momentum in the euro – which was a key proponent behind cable’s bid – has stalled. Some traders are likely to reduce sterling exposure into the UK budget announcement, while near-term factors favour a rebound in the dollar.
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(Justin McQueen is a Reuters market analyst. The views expressed are his own.)