**GBP/USD Tests Six-Month Lows as Pound Sterling Continues to Sink**
*By Christian Borjon Valencia, originally published on FXStreet*
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The British Pound remains under heavy pressure against the US Dollar, testing fresh six-month lows as weakening data from the United Kingdom and hawkish sentiment from the US Federal Reserve continue to direct the GBP/USD pair’s movement. As market volatility persists, traders and investors are parsing a complex landscape of economic releases, central bank policies, and geopolitical influences that have converged to accelerate the recent slide in the British currency.
### Latest Developments Driving GBP/USD Lower
The GBP/USD pair declined sharply, slipping to levels not witnessed since spring, with the most recent move pushing the currency couple down toward the crucial 1.2100 psychological handle. The selloff reflects a confluence of factors on both sides of the Atlantic:
– **Deteriorating UK Economic Data**
– Recent data releases have highlighted growing concerns over the resilience of the UK economy. Reports showcased lagging retail sales and persistent inflationary pressures, underscoring how elevated living costs are straining households.
– The latest labor market figures revealed a jump in unemployment claims, while wage growth showed tentative moderation. Sluggish job creation and diminishing consumer confidence point to possible stagnation, if not contraction, in the months ahead.
– UK GDP growth readings have failed to inspire, with output stagnating and business activity indices slipping toward contractionary territory according to both PMI and survey data.
– **Bank of England’s Shifting Policy Stance**
– The Bank of England (BoE) has found itself in a conundrum. Previously committed to a cycle of rate hikes to combat persistent inflation, policymakers have shifted to a more cautious tone amidst signs of economic fragility.
– Recent BoE statements have emphasized a data-dependent approach, and forward guidance now leans less aggressively hawkish, with markets scaling back expectations for future rate increases.
– The divergence from the more aggressive tightening stance by the US Federal Reserve has contributed to the Pound’s underperformance.
– **US Dollar Strength and Federal Reserve Policy**
– The US Dollar index (DXY) continues to hold near cycle highs, bolstered by robust US economic data, a resilient labor market, and stubborn core inflation readings.
– Federal Reserve officials have repeatedly signaled their readiness to maintain higher interest rates for longer, buoying the greenback and creating further headwinds for major peers such as Sterling.
– Investors have dialed back bets on Fed rate cuts in early 2024, with some even pricing in the possibility of another rate hike before the current tightening cycle ends.
### Technical Analysis: GBP/USD Dips Toward Multi-Month Lows
The technical landscape for GBP/USD has turned increasingly bearish over recent weeks. After failing to sustain rallies above the 1.2300 region, sellers have taken control, pushing the exchange rate through a succession of key support levels.
– **Support Levels**
– Immediate support has emerged near 1.2100, a level tested during the latest wave of selling. A conclusive break below this region would put the spring 2023 lows into play.
– Below 1.2100, technical analysts are eyeing the 1.2000 psychological round number as the next major downside target.
– Further support lies at 1.1850, which marks the lows registered earlier in the year.
– **Resistance Levels**
– Any recovery faces initial resistance at 1.2200, where previous support has now turned into resistance.
– Additional upside hurdles include previous swing highs at 1.2250 and 1.2330, while the 200-day moving average looms higher as a critical barrier.
Momentum readings across daily and weekly charts reflect entrenched bearish pressure, with sellers exploiting any intraday rallies to reset short positions. The Relative Strength Index (RSI) remains in bearish territory but not
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