**GBP/USD Weakens Below 1.3350: US-China Trade Tensions in Focus**
*By FXStreet Team*
(*Adapted and expanded article; original reporting by Anil Panchal, FXStreet*)
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### Executive Summary
The British Pound (GBP) has come under renewed pressure against the US Dollar (USD), with the GBP/USD pair dipping below the 1.3350 mark. This move is largely attributed to a combination of reignited US-China trade tensions, uncertain global growth prospects, and domestic political factors in the UK, all of which are shaping market sentiment at the outset of this key trading week. With risk aversion rising, sterling’s immediate direction hinges on geopolitical developments, upcoming economic data, and evolving rhetoric from policymakers on both sides of the Atlantic.
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## USD Strengthens as Safe-Haven Demand Escalates
The Dollar has advanced sharply against its major rivals, benefiting from a surge in safe-haven flows. Investors have become more risk-averse amid escalating concerns over the state of US-China trade negotiations, which have once again destabilized global financial markets and prompted broad-based selling in risk-sensitive assets like the Pound.
– **Safe-Haven Flows:** The Dollar Index (DXY) climbed higher, signaling robust demand for the greenback as investors seek shelter from volatility.
– **Equity Market Sell-Off:** Global equities fell across the board, with riskier currencies and commodities also facing headwinds.
– **Treasury Yields:** US Treasury yields declined as investors moved strongly into government bonds, in a classic risk-off scenario.
This environment has put sustained downward pressure on the GBP/USD pair, accelerating its drop below the psychologically significant 1.3350 level.
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## Renewed US-China Trade Tensions Spark Volatility
Trade relations between the United States and China remain a critical trigger for global financial volatility. Over the weekend and into Monday’s trade, market sentiment soured as headlines indicated an impasse in negotiations. While previously, there had been some optimism over the prospects for a partial deal, fresh disputes over key issues have reawakened fears of a protracted trade war.
### Latest Developments in Trade Talks
– **Stalled Agreements:** Reports cite unresolved sticking points regarding intellectual property protection, technology transfers, and agricultural purchases.
– **Tariff Escalation:** Without progress in resolving core differences, traders are bracing for the possibility of new rounds of tariffs or the expansion of existing ones.
– **Impact on Risk Sentiment:** News of deteriorating negotiations has prompted traders to unwind positions in risk assets, pressuring GBP and other G10 currencies lower versus the Dollar.
Market participants are increasingly cautious, bracing for further headlines that could move markets sharply.
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## Domestic UK Factors Compound Sterling’s Weakness
While global risk-off sentiment is the primary near-term driver, several domestic UK factors are also weighing on the Pound.
### Political and Economic Uncertainty
– **Brexit Deadlines Remain Looming:** Although the UK has officially left the European Union, negotiations over the future trade relationship are far from complete. Investors remain wary of potential disruptions if a comprehensive trade deal is not reached.
– **Scottish Independence Concerns:** The risk of a second Scottish independence referendum continues to hang over the UK political landscape, adding another layer of uncertainty that is keeping some investors on the sidelines.
– **UK Economic Data:** Recent UK data releases have been mixed, with pockets of strength offset by ongoing weakness in key sectors such as manufacturing and construction.
With little in the way of positive news, the Pound has struggled to find buyers during periods of global risk aversion.
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## GBP/USD Technical Analysis: Downtrend Intact Below 1.3350
From a technical chart perspective, the GBP/USD pair has moved decisively lower after failing to sustain rallies above 1.3400. The breach below 1.3350 leaves the pair vulnerable to further declines, especially if risk sentiment does not improve
Read more on GBP/USD trading.