- GBP/USD attracts new sellers at higher levels and is under pressure from a combination of factors.
- Dimming expectations for a big BoE rate hike in November acts as a headwind for sterling.
- The appearance of new bull purchases against the dollar also contributes to the selling tone around the pair.
The GBP/USD it has struggled to find acceptance above the 1.1400 level on Monday and has faced rejection near the 50-day SMA. The intraday decline drags the pair to a new daily low during the European session, although the bulls manage to defend the round level of 1.1300At least for the moment.
With the background of the recent political turmoil in Britain, the gloomy outlook for the British economy they continue to act as a headwind for the pound sterling. The release of preliminary UK PMI data, showing that business activity in both the manufacturing and service sectors contracted at a faster pace in early October, fueled concerns.
In fact, the manufacturing sector indicator fell to 45.8 from 48.4 and the services PMI fell to 47.5 from 50 during the reported month, both missing estimates. The data reduce the odds of a 100 basis point rate hike by the Bank of England (BoE) in November and support the prospects of further losses for the GBP/USD pair amid resurgent demand for the US dollar.
As investors brush aside news that Some Fed Officials Are Signaling Increased Discomfort With Outsized Rate Hikes, the dollar is recovering solidly amid a new move lower in equity markets. Concerns about economic headwinds stemming from rapidly rising borrowing costs, geopolitical risks and China’s strict zero covid policy weighs on investor sentiment.
This fundamental background reinforces the negative outlook for the GBP/USD pair. However, the bears could wait for sustained weakness below the 1.1300 level before opening new positions. Market participants now await preliminary releases of the US PMI. The data could influence the price dynamics of the dollar and give some momentum to the GBP/USD pair.
GBP/USD technical levels
Source: Fx Street
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