**GBP/USD Price Tumbles Under 1.3307: What’s Driving Sterling’s Decline?**
*By TradingNews Editorial Staff (Credit: TradingNews.com)*
The GBP/USD currency pair, commonly referred to as “Cable,” has recently experienced notable downward pressure, breaking through the psychological support level of 1.3307. Traders, investors, and analysts alike are paying keen attention as the British pound continues to depreciate against the US dollar. Several macroeconomic drivers, technical factors, and market sentiment shifts have contributed to this decline. This article explores why GBP/USD has fallen under 1.3307, what the move could mean for traders, and what to monitor in the sessions ahead.
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## Overview of GBP/USD Movements
The GBP/USD has been one of the most actively traded forex pairs globally. Recent trading sessions have seen increased volatility, as participants react to a confluence of economic data releases, central bank commentary, and shifting risk sentiment.
– **Recent low:** GBP/USD slipped below 1.3307, marking its weakest point against the dollar in several months.
– **Volatility spike:** The break of key technical levels triggered substantial stop-loss selling and increased volume in intraday trading.
– **Downward momentum:** As the pair pushes below this key support, analysts debate whether bears have taken control or if a rebound is in the making.
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## Key Factors Behind GBP/USD Weakness
### 1. Diverging Monetary Policy: Fed vs. Bank of England
One of the most significant drivers behind the pound’s weakness is the growing divergence in monetary policy outlook between the Bank of England (BoE) and the US Federal Reserve (Fed).
– **Hawkish Fed:** Recent communications from Federal Reserve officials have confirmed the US central bank’s commitment to tighter monetary policy in response to persistent inflation. Faster tapering of asset purchases and earlier rate hikes are now widely anticipated.
– **Dovish BoE:** In contrast, the Bank of England has taken a much more cautious tone. Despite inflation running above targets, the BoE surprised markets in its last meeting by standing pat on rates. This cautious stance has led traders to scale back expectations for imminent tightening.
Policy divergence causes capital to flow toward markets offering higher yields, and at present, US Treasury yields are climbing faster than their UK equivalents. As a result, the dollar is benefiting intensely from yield-chasing flows while the pound lags.
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### 2. Weak UK Economic Data
The economic recovery in the UK is showing signs of stalling, with critical releases providing few reasons for optimism regarding sterling.
– **GDP growth slowing:** Recent GDP figures have underwhelmed, with the UK economy expanding at a slower pace than forecast.
– **Labor market uncertainty:** Despite falling unemployment rates, wage growth momentum has cooled, and anecdotal evidence suggests labor shortages in key sectors.
– **Consumer confidence dips:** Surveys reveal that British households are growing more cautious about the outlook, curbing discretionary spending.
These fundamentals weigh on the pound, as forex traders price in a slower pace of recovery relative to the United States.
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### 3. Resurgent US Dollar
The US dollar has staged an impressive rally across the board, not just versus sterling. The dollar index (DXY), which tracks the greenback against a basket of major currencies, has reached multi-month highs. This broad-based strength further hurts GBP/USD.
– **Safe haven flows:** Renewed concerns over global growth and geopolitical risks have pushed investors toward US dollar assets, viewed as a liquid and safe store of value.
– **Higher real yields:** Adjusted for inflation, US bond yields remain among the most attractive in the developed world, incentivizing inflows.
– **Technical breakout:** The dollar’s rally is being bolstered by momentum trading and algorithmic strategies which amplify moves when key levels break.
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### 4. Brexit-Related Headwinds and Political Uncertainty
Politics have returned to haunt GBP/USD traders
Read more on GBP/USD trading.