- A combination of factors dragged GBP/USD lower for the fourth successive day.
- Brexit woes weighed on the GBP; hawkish Fed expectations underpinned the USD.
- Mixed US economic data did little to provide any meaningful impetus to the major.
The GBP/USD pair maintained its offered tone through the early North American session and had a rather muted reaction to the mixed US macro data. The pair was last seen trading around mid-1.3300s, just a few pips above YTD low set in the last hour.
The pair extended its recent downfall from levels just above the key 1.3500 psychological mark and continued losing ground for the fourth successive day on Wednesday. The impasse over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound. This, along with the emergence of fresh buying around the US dollar, exerted some pressure on the GBP/USD pair.
In fact, the key USD Index shot to a fresh 16-month peak and remained well supported by expectations that the Fed would hike interest rates sooner rather than later amid rising inflationary pressures. Apart from this, the risk-off impulse in the equity markets further benefitted the greenback's relative safe-haven status. The combination of factors, to a larger extent, helped offset retreating US Treasury bond yields.
The USD held on to its gains and moved little after the Prelim (second estimate) US GDP print showed that the economy expanded by a 2.1% annualized pace during the third quarter of 2021. This was slightly better than the 2.0% growth reported originally, though missed market expectations for a reading of 2.1%. Separately, the US Weekly Initial Jobless Claims dropped more than expected to 199K from 270K in the previous week.
Meanwhile, the headline US Durable Goods Orders unexpected declined by 0.5% in October, while orders excluding transportation items matched estimates and increased 0.5% during the reported month. The data did little to dent the prevalent strong bullish sentiment surrounding the USD or lend any support to the GBP/USD pair. This, in turn, suggests that the recent downward trajectory might still be far from being over.
Technical levels to watch
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