GBP/USD slides below mid-1.3100s, lowest since December 2020 amid a blowout USD rally

The GBP/USD pair continued losing ground through the mid-European session and dropped to the lowest level since December 2020, around the 1.3140 region in the last hour.

The pair added to last week's heavy losses and witnessed some follow-through selling for the third successive day on Monday amid an extension of the recent strong US dollar rally. Investors continued to dump riskier assets in the wake of a further escalation in the Russia-Ukraine conflict. This, in turn, boosted demand for traditional safe-haven assets and pushed the USD to its highest level since May 2020.

In the latest development, US Secretary of State Antony Blinken said that the Biden administration was in discussions with European governments about banning imports of Russian crude and natural gas. This has led to a sharp rise in prices of crude oil prices and stoked fears of a major inflationary shock for the global economy. This was seen as another factor that took its toll on the already weaker risk sentiment.

Apart from this, Friday's mostly upbeat US monthly employment details and an uptick in the US Treasury bond yields further underpinned the greenback. The downward trajectory took along some short-term trading stops placed near the 1.3200 round figure. Hence, the decline could further be attributed to some technical selling. A subsequent break below the 2021 low might have already set the stage for further losses.

There isn't any major market-moving economic data due for release on Monday, either from the UK or the US, leaving the GBP/USD pair at the mercy of the USD price dynamics. This, in turn, suggests that the market focus remains on the incoming geopolitical headlines ahead of the third round of the Russia-Ukraine ceasefire talks.

Technical levels to watch