**GBP/USD Weakens Below 1.3350 as US-China Trade Tensions Remain in Focus**
*Original article by FXStreet News Team*
The British pound (GBP) faced renewed selling pressure against the US dollar (USD) in Asian markets, dropping below the significant 1.3350 mark. The decline traced its origins to heightened market caution amid escalating US-China trade tensions. As global risk appetite wavered, the GBP/USD pair encountered additional downward momentum due to a combination of macroeconomic concerns, Brexit anxiety, and robust demand for the safe-haven dollar.
**GBP/USD Under Pressure: Key Dynamics**
The forex market is particularly sensitive to geopolitical flare-ups, and the latest headlines from the US-China front have not inspired optimism. Here’s a detailed look at the factors influencing GBP/USD price action:
– **US-China Trade Tensions Intensify**
Recent announcements suggest that both the US and China are steadfast in their trade-related positions, raising fears that ongoing talks may fail to yield a consensus. This environment has stoked demand for safe-haven assets, primarily the greenback, while higher-yielding and risk-sensitive currencies such as the British pound have faltered as market participants seek refuge.
– **Dollar Strength a Major Headwind**
As risk aversion took hold, the US dollar index ticked higher during Asian trading. Investors flocked to USD, further pressuring GBP/USD. The dollar’s outperformance often stems from its position as the world’s primary reserve currency and its perceived safety during global volatility.
– **Cable Slides below Psychological Support**
The sterling-dollar pair moved beneath the psychological 1.3350 support zone, which had previously provided a floor during dips. Breaching this level opened the door to further downside, attracting sellers and stop-loss triggers for those who had anticipated a rebound.
**UK Economic and Political Backdrop**
Fundamental elements relating to the UK economy and political landscape continue to weigh on GBP sentiment. Recent releases and ongoing uncertainty mean the pound remains vulnerable to sharp swings.
– **Brexit Uncertainty Lingers**
Even as the UK government attempts to finalize a comprehensive trade agreement with the European Union, market anxiety persists. There has yet to be a breakthrough in key negotiating areas, namely fisheries, level playing field regulations, and governance structures, leaving the pound exposed to negative headlines.
– **Disappointing Economic Data**
The latest figures from the Office for National Statistics show that the UK economy continues to struggle with its recovery from the pandemic shock. GDP readings underwhelmed, and service sector activity slowed more than anticipated, reinforcing concerns about prolonged weak growth.
– **Bank of England’s Stance**
The central bank’s dovish tone has further pressured GBP. Policymakers have repeatedly signaled they are prepared to adjust policy, potentially with more stimulus or even negative interest rates, should incoming data disappoint or the economy require additional support.
**US Dollar Outlook: Broad-Based Strength**
The US dollar’s standing as a safe haven has been underscored during the current round of market jitters. Risk-off positioning has benefitted the USD basket, which continues to see inflows at the expense of currencies like the pound, euro, and commodity-linked units.
Key drivers behind this USD momentum include:
– **Rising US Treasury Yields**
Higher yields on US government bonds tend to increase the dollar’s attractiveness for investors seeking real returns and safety.
– **Positive Macroeconomic Reports**
Recent releases from the US, such as jobs data and retail sales, have surpassed expectations. This in turn has emboldened bulls to push the dollar higher.
– **Federal Reserve Communication**
While the Fed maintains an accommodative stance, officials have expressed optimism about the ongoing recovery, reducing the likelihood of further aggressive easing in the near term.
**Technical Perspective: GBP/USD Weakening Bias**
A look at the charts reveals a bearish technical set-up for GBP/USD after
Read more on GBP/USD trading.