- No-deal Brexit fears/dovish BoE expectations continue to weigh on the British Pound.
- Tempered Fed rate cut bets underpinned the USD and exerted some additional pressure.
- Technical selling below the 1.2500 handle further accelerates the downward momentum.
The GBP/USD pair remained heavily offered through the mid-European session on Tuesday and weakened farther below mid-1.2400s, hitting its lowest level since early-January.
Against the backdrop of growing fears of a no-deal Brexit, the already weaker sentiment surrounding the British Pound deteriorated further in the wake of the recent disappointment from the UK macro data – the overnight British Retail Consortium’s like-for-like retail sales report being the latest.
The report showed retail sales fell 1.6% from a year earlier in June and also revealed that average sales over the last 12 months had fallen 0.1% – the worst performance since 2012, suggesting softer economic growth during the second quarter of 2019 and strengthening the case for policy easing by the BoE.
On the other hand, the US Dollar remained well supported by last Friday’s upbeat headline NFP print, which forced investors to scale back expectations for an aggressive Fed rate cut at the upcoming meeting on July 30-31 and exerted some additional downward pressure on the major.
Meanwhile, the latest leg of a slide since the early European session could further be attributed to technical selling on a sustained breakthrough the key 1.2500 psychological mark. A follow-through weakness below the post-NFP swing lows, around the 1.2480 region now opens the room for a further intraday weakness.
However, oversold conditions might help limit the downside, at least for the time being, and ahead of scheduled speeches by influential FOMC members – including the Fed Chair Jerome Powell, which will be looked upon for some fresh impetus during the early North-American session.
Technical levels to watch