- GBP / USD witnesses strong selling on Wednesday and breaks four days of gains.
- A combination of factors pushes the USD higher and puts pressure on the pair.
- Investors are looking forward to the US ADP report on private sector employment for a fresh boost.
The pair GBP/USD continues to lose ground during the European session on Wednesday and falls below 1.3550, approaching the weekly lows again.
The pair encountered some selling pressure on Wednesday and has broken with four consecutive days of earnings at one-week highs, around 1.3650 touched the day before. A combination of factors has helped the US dollar gain strong continuation traction, which has been seen as a key factor that has put heavy pressure on the GBP / USD pair.
The dollar has continued to receive support from market expectations that the Fed would begin reversing its massive pandemic-era stimulus as early as November. Markets also appear to have started pricing in the possibility of a Fed rate hike in 2022 amid concerns that continued rising oil and energy prices will fuel inflation.
Apart of this, the fragile trade ties between the United States and China, the Evergrande debt crisis in China and a stagnation on the US debt ceiling they unleashed a new wave of risk aversion. This, coupled with a strong upward movement in US Treasury yields, has continued to act as a tailwind for the safe-haven USD and prompted further selling around the GBP / USD pair.
The pound sterling has been further affected by renewed tensions between Britain and France over post-Brexit fishing rights. In the latest evolution, French Finance Minister Bruno Le Maire has stated that France will define an action plan on the UK and fisheries on October 15. Furthermore, the current fuel crisis in the UK has weighed even more on the British pound.
Market participants are now awaiting the release of the US ADP report on private sector employment for some momentum later at the start of the American session. This, along with US bond yields and broader market risk sentiment, will influence price dynamics around the USD and could generate some trading opportunities around the GBP / USD pair.
GBP / USD technical levels
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