GBP/USD drops to 2018 lows as European politics weigh on Pound

Cable continues its multi-week slide despite holiday-thinned trading. The US and the UK markets are closed in observance of Memorial Day and Spring Bank holiday respectively.
The market is driven by the US Dollar strength and Italian and Spanish political situation which are denting market sentiment.

Flavio Tosti Independent Analyst

The GBP/USD bears are winning again on Monday as the pair is revisiting the 2018 low currently trading at around 1.3300 down 0.04% in the data-light session on Monday.

The US Dollar Index (DXY) which measures the greenback relative strength compared with a basket of currencies worldwide is hovering near 5-month highs near the 94.30 as traders have been piling in the USD long trades as they expect the Federal Reserve Bank to hike three times in 2018. Market participants are widely expecting the next rate hike at the June meeting of the Federal Reserve.

Market sentiment is dented by Italian and Spanish political headlines and weighs on GBP.

On the negative side, Sterling is suffering because of market participants' reprisal of probability of the Bank of England hiking rates this year. The BoE is data-dependent and investors will carefully watch inflation and growth indicators in the coming weeks after the last set of macro data fell short of market expectations.

The main highlights of the week will revolve around the US Non-Farm Payroll and wage growth data on Friday and the US Gross Domestic Product (GDP) as well as the core Personal Consumer Expenditure PCE) price index on Wednesday. It is worth noting that the PCE is the favorite gauge of inflation of the Fed.

GBP/USD 4-hour chart

Bears are in control as the market is trading well below its 50, 100 and 200-period simple moving averages on the 4-hour chart. Immediate support is seen at 1.3300 and at the 1.3200 figure while to the upside bulls will likely meet resistance at the 1.3400 handle and at the 1.3492 swing high.

Author

Flavio Tosti

Independent Analyst

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