- GBP/USD is again approaching the weekly low and is being pressured by a combination of factors.
- Softer-than-expected UK CPI data weighs on the pair amid broad-based USD strength.
- The bears are now waiting for the US economic data to get any significant momentum.
GBP/USD comes under intense selling pressure on Wednesday and extends the previous day’s late pullback from more than a week highs. The fall remains uninterrupted in the middle of the European session and drags spot prices closer to the weekly low again, around the 1.2035 zone in the last hour.
Sterling weakens across the board in reaction to softer than expected UK consumer inflation figures. This comes after a dovish assessment of the Bank of England’s policy decision and suggests that the current rate hike cycle may be coming to an end. Apart from this, a strong follow-up to buying around the US dollar contributes to the sharp intraday drop in GBP/USD of almost 150 points.
In fact, the USD index, which tracks the USD against a basket of currencies, is holding near multi-week highs amid expectations of further Fed tightening. Bets were seen boosted by the US CPI report and hawkish comments from several FOMC members on Tuesday. In addition, the prevailing risk-averse state, reflected in a generally weaker tone in equity markets, further props up the dollar as a safe haven.
With the last leg down, the GBP/USD pair reverses its weekly gains and looks set to depreciate further. The continuation of sales below the weekly low, around the 1.2030 zone, will reaffirm the negative bias. This, in turn, would pave the way for a further drop below the key psychological level of 1.2000, with the aim of challenging the support of the 200-day SMA, which is currently near the 1.1935 zone.
Next, the US economic agenda, with the publication of Retail Sales and the Empire State Manufacturing Index. Traders will continue to watch risk sentiment, which will influence dollar price dynamics and give GBP/USD further impetus. However, the aforementioned fundamental undercurrent favors the bears and suggests the path of least resistance for the pair.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
