**GBP/USD Eases to One-Week Low Near 1.3600 as Tepid UK Economic Activity Weighs**
*Originally reported by Capital Market, Business Standard*
The British Pound (GBP) weakened against the US Dollar (USD) in recent sessions, dropping to its lowest level in over a week near the 1.3600 mark. This decline comes on the heels of a string of disappointing data underscoring tepid economic activity in the United Kingdom, alongside persistent strength in the US Dollar driven by expectations of continued monetary tightening by the Federal Reserve. In this article, we delve deep into the driving forces behind the GBP/USD retreat, examine recent economic indicators from both sides of the Atlantic, and evaluate the potential outlook for the pair in the near term.
## Weak UK Data Weighs on Sterling
The immediate catalyst for the Pound’s pressure stemmed from recent UK macroeconomic releases that fell short of market expectations. Particularly concerning to investors is the evident slowdown in Britain’s growth trajectory. Analysts note a combination of soft gross domestic product (GDP) figures, sluggish industrial and manufacturing output, and consumer-facing sectors hobbled by persistent cost-of-living pressures.
**Key Points from Recent UK Economic Releases:**
– **UK Gross Domestic Product (GDP):** The latest data revealed that the UK economy stagnated in the last quarter as GDP growth flatlined, missing estimates for a modest expansion. The lack of momentum signals increasing vulnerability to headwinds such as high energy costs and post-Brexit trade uncertainty.
– **Industrial and Manufacturing Output:** Both measures contracted more than anticipated, highlighting broad-based weakness across the production sectors. Supply chain disruptions, higher input costs, and subdued export demand contributed to the decline.
– **Services PMI (Purchasing Managers’ Index):** The services sector, a dominant component of the UK economy, showed only marginal growth, with survey respondents citing consumer retrenchment in the face of elevated inflation.
– **Retail Sales:** Figures showed lower-than-expected consumer spending, reflecting the ongoing squeeze on household budgets due to rising prices and stagnant wage growth.
These lackluster data releases signal a fragile economic recovery, leaving Sterling vulnerable to further losses, especially as traders reassess the outlook for Bank of England (BoE) monetary policy.
## US Dollar Strength Intensifies
Compounding the GBP/USD decline is the robust performance of the US Dollar on the global stage. The Dollar Index, which tracks the greenback’s value against a basket of major currencies, surged to recent highs as investors recalibrated expectations for Fed rate hikes.
Several factors have contributed to this Dollar strength:
– **Stubbornly High US Inflation:** Consumer Price Index (CPI) figures continue to outpace forecasts, supporting the case for additional Federal Reserve tightening.
– **Resilient US Labor Market:** Nonfarm payroll reports show strong job creation, suggesting the US economy remains robust and can absorb tighter financial conditions.
– **Fed Hawkishness:** Fed officials have consistently signaled a willingness to keep rates higher for longer to tame inflation, bolstering the greenback against G10 counterparts.
– **Safe-Haven Demand:** Geopolitical tensions and volatility in global markets have increased demand for the US Dollar as a safe-haven asset.
## Market Reaction and GBP/USD Technical Picture
Following the string of disappointing UK data and buoyant US Dollar sentiment, the GBP/USD currency pair tumbled to approach the 1.3600 level, its weakest showing in over a week. Short-term technical analysis highlights mounting downside risks, as key support and resistance levels come into play.
**GBP/USD Technical Overview:**
– **Immediate Support:** The 1.3600 psychological level represents interim support. A decisive move below this threshold may expose the pair to further declines towards 1.3550 and then the 1.3500 handle.
– **Key Resistance:** On the upside, the 1.3650 area serves as an initial resistance, followed
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