- GBP / USD is witnessing strong selling for the third day in a row and falls to multi-week lows.
- The Fed’s optimistic expectations and risk aversion in the markets drive the safe-haven USD.
- The FOMC’s decision should give new directional momentum ahead of the BoE on Thursday.
The pair of GBP/USD continues to lose ground during the first half of the European session and falls to lows of almost a month, around the region of 1.3660, in the last hour.
The pa has extended last week’s retracement drop from just above the 1.3900 level and has been witness strong continuation sales for the third day in a row on Monday. This also marks the fourth day of negative movement in the previous five and is solely due to a broad strength in the US dollar.
The US dollar has continued to receive support from strong market expectations that the Fed would begin reversing its massive pandemic-era stimulus sooner rather than later. This has been evident by the recent rally in US Treasury yields, which has continued to act as a tailwind for the USD and has dragged the GBP / USD down.
Apart of this, risk aversion in the market it has provided an additional boost to the safe haven USD. Investors remain concerned about the rapid spread of the Delta variant and a global economic slowdown. This, coupled with concerns about the health of Chinese real estate giant Evergrande Group, has affected risk sentiment.
With the latest drop, the GBP / USD has returned a significant part of its strong recovery from the August monthly lows of around 1.3600. This level should now act as a key turning point for investors. ahead of this week’s major key central bank risk events: the FOMC on Wednesday and the BoE decision on Thursday.
Investors will be on the lookout for the outcome of the two-day FOMC meeting that begins Tuesday for clues as to when the Fed would likely begin reducing its bond purchases. This, in turn, will play a key role in influencing short-term USD price dynamics and providing new directional momentum to the GBP / USD pair.
GBP / USD technical levels
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