- GBP/USD continues to lose ground for the fourth day in a row and falls to a new monthly low.
- Fed expectations and risk aversion state support dollar.
- The pound continues to be affected by the UK economic outlook.
The GBP/USD is falling for the fourth day in a row on Monday. It reached lows in a month and a half during the European session in 1.1781. It rebounded slightly from the low and is trading around 1.1800, showing signs of weakness and still vulnerable to prolonging the downtrend seen in the last two weeks.
US dollar buying continues apace in the new week and proves to be a key factor putting downward pressure on GBP/USD. In fact, the Dollar Index (DX) rises to its highest level since mid-July amid growing expectations that the US central bank will maintain its aggressive tightening policy. The bets were bolstered by recent hard-line comments from several officials in the Federal Reserve. Also on Monday, the dollar receives extra support from the climate of risk aversion.
Sterling, meanwhile, is weighed down by the gloomy UK economic outlook and growing recession fears. Concerns were fueled by a further deterioration in the Gfk consumer confidence index for the United Kingdom, which fell to a record level of -44 in August. This further cast a shadow over prospects for a 50 basis point rate hike by the Bank of England in September.
Therefore, an extension of the retracement towards the 1.1760 region, the July low, now looks like a distinct possibility. In the absence of major economic releases from both the UK and the US, the focus at the start of the week would be on what happens to the dollar, stocks and Treasury yields.
Technical levels
Source: Fx Street
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