GBP/USD falls to a fresh daily low around 1.1500 amid USD strength

• GBP/USD is under some selling pressure on Monday amid sustained dollar buying.
• Rising US bond yields and boosting risk aversion lift safe-haven demand for the dollar.
• The downside looks limited pending key central bank events this week.

The pair GBP/USD struggles to find acceptance above the 1.1600 mark on Monday and pulls back more than 100 points from the daily high. The pair extends the intraday decline throughout the early American session and falls to a new daily low, around the psychological level 1.1500 in the last hour.

The US dollar builds on last week’s rebound from a one-month low and gains traction for the third day in a row, which, in turn, puts downward pressure on the GBP/USD pair. Indeed, the dollar index, which measures the dollar’s performance against a basket of currencies, rises to a multi-day high and is supported by a combination of factors.

The Fed is widely expected to deliver another 75 basis point rate hike at the end of a two-day policy meeting on Wednesday, continuing to support higher US Treasury yields. This, coupled with the risk aversion drive, reflected in a generally weaker tone in equity markets, provides additional lift to the safe-haven dollar.

That said, growing speculation that the US central bank may ease its hawkish stance – amid signs of a slowdown in the US economy – could act as a dollar headwind. Investors may also refrain from making aggressive bets ahead of risks from key central bank events this week and important US macroeconomic data due early in the month.

On Wednesday, the Fed will announce its policy decision, which should play a key role in influencing short-term dollar price dynamics. The Bank of England meeting will then be held on Thursday. Also, the US employment report, popularly known as the NFP, due out on Friday, will help determine the next leg of a directional move for GBP/USD.

Technical levels to follow