**GBP/USD Attracts Sellers Below 1.3500 Amid Renewed US Dollar Demand**
*Original article by Haresh Menghani, FXStreet*
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The GBP/USD currency pair witnessed renewed selling pressure below the key 1.3500 psychological level in the early European session. This downturn comes amid a resurgence in demand for the US Dollar, as fresh geopolitical concerns and hawkish signals from the US Federal Reserve continue to shape foreign exchange markets. The pair’s movement below the 1.3500 barrier signals a possible shift in near-term sentiment, with both global and domestic factors influencing the British Pound’s recent weakness.
**UK Data and Policy Developments**
Recent UK macroeconomic data releases have painted a subdued picture. Growth figures, consumer spending data, and labor market statistics have all shown signs of deceleration, casting uncertainty over the Bank of England’s (BoE) policy trajectory. Although the BoE had previously indicated a willingness to hike interest rates in an attempt to rein in inflation, tepid economic readings now raise questions about the pace and timing of any tightening measures.
Key points impacting Sterling sentiment include:
– **UK GDP Data:** Slower-than-expected growth in recent quarters has heightened concerns over the sustainability of the post-pandemic economic recovery.
– **Inflationary Pressures:** While inflation remains elevated due to supply bottlenecks and higher energy costs, the BoE is cautious about raising rates too aggressively, fearing potential damage to fragile demand.
– **Labor Market Trends:** Employment figures have improved somewhat, but wage growth is still not outpacing inflation, squeezing household incomes and further cooling consumption.
**US Dollar Strength Reasserts Itself**
The US Dollar’s resurgence has been a critical driver behind GBP/USD’s move lower. Several pivotal factors are contributing to the greenback’s recent rally:
– **Fed Policy Outlook:** Minutes from recent Federal Reserve meetings and public comments by central bank officials have emphasized a hawkish tilt. Markets are now increasingly pricing in further rate hikes this year, bolstering dollar demand.
– **Safe-Haven Flows:** Heightened geopolitical tensions, particularly in Eastern Europe and the Middle East, have increased the allure of the US Dollar as a safe-haven asset.
– **US Economic Data:** Recent releases, including robust ISM services indices, better-than-expected jobs numbers, and improving manufacturing output, support the Fed’s case for keeping monetary policy restrictive.
**Market Reactions and Technical Analysis**
Following the breach of 1.3500, GBP/USD has been under consistent selling pressure. Traders and investors are now closely watching for indications of a potential reversal, consolidation, or further downside extension. The price action suggests a negative bias, but short-term technical factors could lead to occasional rebounds.
**Technical Outlook:**
– **Immediate Support:** The 1.3450–1.3430 zone is seen as the next strong support area, as this has acted as a floor in recent sessions.
– **Upside Resistance:** Any recovery is likely to face initial resistance near the 1.3500 mark. A sustained move beyond this level could signal the prospect of further gains toward 1.3550.
– **Momentum Indicators:** Daily Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) point to increasing bearish momentum, although both are approaching oversold territory. This may limit the scope for additional sharp declines in the immediate term.
**Fundamental Catalysts on the Radar**
Investors are now laser-focused on several developing themes and upcoming events that could influence GBP/USD directionality in the near future.
**For the UK:**
– **Bank of England Policy Signals:** Any hints or guidance from BoE officials on interest rate intentions will be closely scrutinized for clues about future moves.
– **Brexit-Related Headlines:** Ongoing trade negotiations, particularly regarding the Northern Ireland Protocol and EU-UK relationships, remain potential sources of market volatility.
– **New Economic Data:**
Read more on GBP/USD trading.