Home GBP/USD hangs near multi-week lows, below 1.3900 mark
FXStreet News

GBP/USD hangs near multi-week lows, below 1.3900 mark

  • GBP/USD lost ground for the sixth consecutive session and was weighed down by a combination of factors.
  • The Fed’s hawkish turn continued underpinning the USD and exerted downward pressure on the major.
  • Dismal UK Retail Sales, COVID-19/Brexit woes acted as a headwind for the GBP and contributed to the fall.

The GBP/USD pair dropped to fresh multi-week lows, around mid-1.3800s during the early European session, albeit quickly recovered few pips thereafter. The pair was last seen trading around the 1.3885  region, down nearly 0.25% for the day.

The pair extended its recent sharp pullback from the 1.4200 mark and witnessed some follow-through selling for the sixth consecutive session on Friday. The downtick was sponsored by the prevalent bullish sentiment surrounding the US dollar, which remained well supported by the Fed’s sudden hawkish turn. On the other hand, disappointing UK Retail Sales data weighed on the British pound and exerted some additional pressure on the GBP/USD pair.

It is worth recalling that the Fed stunned investors on Wednesday and brought forward its projections for the first post-pandemic interest rate hikes. The so-called dot plot pointed to two rate hikes by the end of 2023 as against March’s projection for no increase until 2024. This helped offset the overnight sharp pullback in the US Treasury bond yields and mostly disappointing US macro data – Weekly Jobless Claims and Philly Fed Manufacturing Index.

The intraday selling picked up pace after data released from the UK showed that monthly Retail Sales unexpectedly dropped 1.4% in May. Stripping the auto motor fuel, the Core Retail Sales also fell short of market estimates and declined by 2.1% during the reported month. This, along with the UK government’s decision to push back the timeline for the final stage of easing lockdown measures to July 19, added to worries about the UK economic recovery.

Apart from this, concerns about the EU-UK collision over Norther Ireland protocol further acted as a headwind for the sterling and contributed to the GBP/USD pair’s decline. In the latest Brexit-related developments, UK Prime Minister Boris Johnson said on Wednesday that they will have to take steps to make sure the post-Brexit trade between Britain and NI is uninterrupted. That said, oversold conditions on intraday charts helped limit any further losses.

There isn’t any major market-moving economic data due for release from the US. Nevertheless, the fundamental backdrop seems tilted in favour of bearish traders and supports prospects for a further near-term depreciating move. Hence, any meaningful recovery attempt might still be seen as a selling opportunity and remain capped as the market focus now shifts to the Bank of England monetary policy meeting next week.

Technical levels to watch

 

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.