GBP/USD has been hit as a function of the stronger USD on Monday and is below 1.3500. Rising US bond yields continues to support USD versus its G10 peers and hurt other risk assets. Shortly after the reopen of Monday FX trade (at 22:00GMT on Sunday), GBP/USD slid below a significant area of resistance in the 1.3530s-1.3540s that had been a solid floor since the start of the year. Downside continued into the European session and by the time US markets opened at 14:30GMT, the pair had slid through its 21-day moving average, which currently resides at 1.34909. The move has been driven primarily by USD strength and risk-off; Incoming US President Joe Biden reiterated over the weekend his desire to pass significant additional fiscal stimulus, which has contributed to a further sustained rise in US yields, real and nominal (US 10-year TIPS yield +3bps to above -0.93% and US 10-year yield +2bps to 1.127%), helping to reduce USD’s rate disadvantage. Meanwhile, markets more broadly are concerned about the Covid-19 outbreak in Europe (fears hospitals may be overrun in the UK and Germany) and regarding US/China relations (the US indicated it will improve ties with Taiwan, to the anger of China and is reportedly examining further “options” on China) and this is helping safe-haven USD. Thus, primarily as a result of the above, GBP/USD is significantly softer and is currently consolidating between 1.3450 and 1.3500, with losses of just under 0.5% or around 60 pips on the day. UK fundamental factors to consider Reports emerged over the weekend that the UK government is mulling tightening Covid-19 restrictions to increase the pressure to stay at home after the daily death rate hit a fresh record high over the weekend. Most analysts assume that given the tough lockdown that most of the country has been in since late December and is likely to remain in for at least a few more weeks if not months as health workers rush to vaccinate as much of the population as possible, Q1 2021 is going to be another ugly quarter with GDP growth likely negative. Hence comments from UK Chancellor of the Exchequer Rishi Sunak that we should expect the economy to get worse before it gets better. However, the above news does not seem to have impacted GBP too badly on Monday versus most of its non-USD G10 peers, nor was alarming weekly UK shopping numbers that saw traffic down 27.1% YoY (which, to be fair, makes sense given there was no lockdown in early January 2020). On the month, however, GBP is still the worst performing G10 currency, down some 1.2% versus the US dollar. Elsewhere, Bank of England Monetary Policy Committee Member Gertjan Vlieghe spoke on policy earlier and touched on negative rates; he said work on the feasibility of negative rates was still in progress and reiterated his opinion that, based on the experiences in other countries, negative rates can be effective at boosting lending and activity. Moreover, he reiterated that there is no clear evidence to suggest that negative rates have reduced bank profitability overall. Given that other key members of the bank (such as Governor Andrew Bailey and Chief Economist Andy Haldane) have in the recent past seemingly set the bar quite high for the implementation of negative rates, most analysts still see the bank going down this route as unlikely. Looking ahead for the rest of the week, GBP traders will as ever be keeping an eye on the Covid-19 statistics, including deaths, hospitalisations and new cases, as well as daily vaccinations, for signs as to whether the country will tighten lockdown in the coming weeks and is on course for its vaccination targets. Meanwhile, traders will also keep an eye on a large batch of important November hard data, to be released at 07:00GMT on Friday, including monthly GDP growth, industrial production and trade numbers. GBP/USD breaks below descending triangle GBP/USD broke below a descending triangle during the Asia Pacific session, as well as its 21-day moving average at just under 1.3500. Should the losses extend, the key downside levels to watch will be the 28 December lows at just above 1.3425, the psychological 1.3400 level and then the 50-day moving average at just above 1.3350. To the upside, the prior floor to the price action in 2021 in the 1.3530-1.3540 region ought to offer decent resistance. GBP/USD four hour chart FX Street FX Street FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions. View All Post By FX Street FXStreet News share Read Next BoC: Most firms reported stronger investment and hiring plans FX Street 11 months GBP/USD has been hit as a function of the stronger USD on Monday and is below 1.3500. Rising US bond yields continues to support USD versus its G10 peers and hurt other risk assets. Shortly after the reopen of Monday FX trade (at 22:00GMT on Sunday), GBP/USD slid below a significant area of resistance in the 1.3530s-1.3540s that had been a solid floor since the start of the year. Downside continued into the European session and by the time US markets opened at 14:30GMT, the pair had slid through its 21-day moving average, which currently resides at 1.34909. 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