**FxWirePro: GBP/USD Drops as Dollar Strengthens Post US-EU Trade Pact**
*By FxWirePro, as originally published by EconoTimes*
The GBP/USD currency pair experienced a notable decline in recent trading sessions as the US dollar surged in strength, following the announcement of a new trade agreement between the United States and the European Union. The development injected fresh momentum into the greenback, putting pressure on the British pound as currency markets readjusted to shifting trade dynamics and market sentiment.
## Overview of Recent GBP/USD Movement
In the sessions following the US-EU trade pact announcement, GBP/USD reversed earlier gains and shifted into a bearish trend. The pair fell below key technical levels as investors responded to the strengthening US dollar and recalibrated their outlook for the pound’s trajectory.
– **GBP/USD opened the week with mild gains**, reflecting earlier optimism around the UK economy and global risk appetite.
– **Downward pressure increased** as news broke of the US-EU trade agreement, sparking renewed US dollar demand across the board.
– The pair slipped beneath the closely-watched 200-day moving average and approached support levels that are viewed as critical by technical analysts.
– Safe-haven inflows into the dollar were amplified by ongoing global economic uncertainties and concerns about slower growth in key economies.
## Key Drivers Behind GBP/USD Decline
Several interconnected factors contributed to the latest slide in GBP/USD:
### 1. US Dollar Strength After US-EU Trade Pact
The announcement of a trade accord between the US and the EU was viewed by market participants as a sign of reduced trade tensions between the two economic superpowers. The agreement covered various sectors, including technology, agriculture, and industrial goods, and signaled the willingness of both parties to move beyond confrontational rhetoric.
– As uncertainty faded, global markets responded favorably, with US equities and the dollar both benefitting from the improved climate.
– The dollar’s role as the world’s primary reserve currency ensured it was a major beneficiary of positive risk sentiment.
– Investors who had earlier positioned defensively in anticipation of prolonged tensions reversed course, resulting in a broad-based rally in the US dollar.
### 2. Diminished Appeal of the Pound
While the pound has enjoyed periods of resilience in 2023 and early 2024, recent macroeconomic data from the UK has been mixed at best.
– A series of soft economic reports highlighted concerns about UK consumer spending, manufacturing output, and services sector growth.
– Persistent political uncertainties related to Brexit implementation and future trade relationships have kept investors wary of the pound’s prospects.
– With the US dollar gaining fresh strength, the British currency was unable to hold onto recent gains.
### 3. Global Risk Sentiment and Safe-Haven Flows
Despite the decrease in US-EU tensions, the global economic environment remains shadowed by lingering risks, including slowing growth in China and ongoing geopolitical flashpoints in Eastern Europe and the Middle East.
– Such risks continue to drive periodic flights to quality, benefiting the US dollar at the expense of risk-sensitive currencies like the pound.
– Central banks, institutional investors, and corporations intensified dollar-buying to hedge against unforeseen global shocks.
## Technical Analysis: Key Levels and Patterns
Currency market technicians closely analyze GBP/USD price behavior using a blend of chart patterns, moving averages, and momentum indicators.
– **Support levels:** The pair broke through 1.2750 and approached 1.2700, both seen as crucial floors by market participants.
– **Resistance levels:** Upside retracements are expected to face resistance near 1.2820 and, subsequently, at 1.2855.
– **Moving averages:** The widely-followed 50-day moving average and the 200-day moving average acted as switching points for directional bias.
– **Momentum indicators:** Relative strength indexes (RSI) and moving average convergence divergence (MACD) readings tilted bearish, confirming strong downside momentum.
According to FxWirePro technical
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