- GBP/USD witnesses heavy selling for the third successive day and drops to a one-month low.
- Hawkish Fed expectations, recession fears underpin the USD and exert downward pressure.
- The fundamental backdrop favours bearish traders and supports prospects for further losses.
The GBP/USD pair prolongs a one-and-half-week-old bearish trend and continues losing ground for the third successive day on Friday. This also marks the sixth day of a negative move in the previous seven and drags spot prices below the 1.1900 mark, or a one-month low during the first half of the European session.
US dollar buying remains unabated on the last day of the week and turns out to be a key factor that continues to exert downward pressure on the GBP/USD pair. In fact, the USD Index (DXY), which tracks the greenback against a basket of half a dozen major currencies has shot to its highest level since July 18 and remains well supported by hawkish Fed expectations.
The recent comments by several Fed officials suggest that the US central bank will stick to its policy tightening path to tame inflation. The prospects for a further rate increases by the Fed have pushed the yield on the benchmark 10-year US government bond back closer to the 3.0% threshold. This, along with the prevalent risk-off mood, underpins the safe-haven buck.
The British pound, on the other hand, struggles to find buyers despite better-than-expected UK Retail Sales, which recorded the first increase in three months and rose 0.3% in July. The Bank of England's bleak outlook, warning that a prolonged recession would start in the fourth quarter, continues to weigh on sterling and contributes to the GBP/USD pair's decline.
From a technical perspective, acceptance below the 1.1900 mark could be seen as a fresh trigger for bears and supports prospects for a further near-term depreciating move for the GBP/USD pair. Hence, a subsequent fall towards the next relevant support, around the 1.1820 region, remains a distinct possibility amid absent relevant economic data from the US.
Technical levels to watch
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