**FxWirePro: GBP/USD Bearish Momentum Builds as Dollar Continues to Gain**
*By FxWirePro Analyst Team — Adapted and expanded from source at EconoTimes*
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The British pound (GBP) slipped further against the US dollar (USD) as bearish sentiment continued to intensify in the forex markets. The GBP/USD pair is now facing significant downward pressure due to a combination of fundamental, technical, and geopolitical factors. As the US dollar enjoys sustained demand, the pound remains vulnerable to additional losses, with investors closely monitoring upcoming economic data and central bank moves.
**Current Market Overview**
GBP/USD continued its descent in the latest trading sessions, after briefly attempting to consolidate above 1.2700. The pair is now trading near crucial support levels, reflecting broad strength in the greenback as risk-off sentiment dominates the global outlook. Renewed concerns about both the US and UK economic trajectories are playing a pivotal role, but the divergence in monetary policy expectations and data surprises, particularly from the US, are tilting the balance in favor of the dollar.
**Key Drivers of GBP/USD Bearish Momentum**
Several interconnected factors are contributing to the bearish momentum surrounding GBP/USD:
– **Resilient US Economic Data**: The US economy continues to outperform expectations. Key data releases, including robust employment reports, strong retail sales, and higher-than-anticipated inflation, have cemented the view that the Federal Reserve will keep rates elevated for an extended period.
– **Federal Reserve Hawkishness**: Recent statements from Fed officials reinforce a “higher-for-longer” rate stance. Policymakers have signaled caution over declaring victory against inflation, with Chair Jerome Powell emphasizing the need to see more evidence that inflation pressures are subsiding.
– **UK Economic Headwinds**: The UK faces its own array of economic roadblocks. Sluggish GDP growth, wavering consumer sentiment, and ongoing cost-of-living pressures continue to curtail expectations for a swift rebound.
– **Bank of England Caution**: The BoE, after a series of aggressive rate hikes, has moved to a more cautious footing. Markets expect the BoE’s next steps to be more dovish or data-driven, especially given recent softer inflation prints and evidence of a cooling labor market.
– **Risk Aversion and Safe-Haven Demand**: Ongoing geopolitical tensions and uncertainties surrounding global supply chains have fueled demand for safe-haven assets such as the US dollar. This dynamic typically weighs heavily on risk-sensitive currencies including the pound.
**Fundamental Developments in Depth**
*US Resilience and Dollar Demand*
The latest releases from the US Labor Department and Census Bureau highlight an economy that is withstanding higher interest rates with relative ease. May’s nonfarm payrolls exceeded expectations, confirming employers remain confident enough in demand to hire persistently. Core inflation, although inching downward, remains above the Fed’s target.
These factors have led the yield on benchmark US Treasuries to climb, supporting the dollar near multi-month highs. Market-implied probabilities now heavily favor the Fed keeping rates unchanged for the next several meetings, with the possibility of a single cut later this year.
*UK’s Sluggish Recovery and Political Uncertainty*
In contrast, the UK economy showed scant growth in the first and second quarters of 2024. The consumer price index cooled to below 2 percent annualized for the first time since 2021, while jobless claims and wage growth are starting to moderate. The BoE’s more cautious guidance and division among MPC members over the timing of rate adjustments further add to the uncertainty.
The upcoming UK general election and uncertainty over fiscal stance also cast a shadow, with businesses and foreign investors waiting for greater policy clarity post-election. Any fiscal loosening may assist growth but would likely put renewed pressure on inflation and the currency.
*Divergence in Central Bank Trajectories*
The divergence between the Fed and BoE policy trajectories is increasingly evident in forward guidance and market pricing.
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