- GBP/USD comes under selling pressure again and falls to a new low since 1985.
- The BoE’s 50 basis point rate hike on Thursday and recession fears weigh on sterling.
- The dollar hits a new 20-year high and further contributes to the pair’s bearish move.
The pair GBP/USD continues its recent downtrend and weakens further below the 1.1200 level, reaching its lowest level since 1985 during the European session on Friday. The bearish trajectory increases after the publication of the preliminary UK PMIs and drags the pair towards the 1.1150 region.
The 50 basis point rate hike by the Bank of England on Thursday disappointed market participants who anticipated a more aggressive monetary policy. On the other hand, British Prime Minister Liz Truss’s energy relief package for homes and businesses could help curb inflation and has laid the groundwork for a dovish turn by the UK central bank. This turns out to be a key factor that continues to weigh on the British pound amid the risk of a looming recession.
Market fears were fueled by the release disappointing from preliminary UK PMI data, which showed business activity in both the manufacturing and services sectors contracted in September. Elsewhere, the US dollar reaches a new two-decade high and remains well supported by the more aggressive stance taken by the Federal Reserve. This further contributes to the heavily offered tone surrounding the GBP/USD pair.
Meanwhile, the latest move lower could be attributed to some technical selling below the 1.1200 level. This could have set the stage for an extension of the bearish path, although the extreme oversold conditions on short-term charts warrant some caution for aggressive bears. Market participants are now waiting for the preliminary US PMI figures to gain some momentum ahead of Fed Chairman Jerome Powell’s speech.
GBP/USD technical levels
Source: Fx Street
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