**GBP/USD Weakens Toward 1.3400 as Dollar Strengthens; Focus Shifts to Tariffs and Fed Drama**
*By: Azeez Mustapha (all credit to the original author)*
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The British Pound (GBP) faced renewed selling pressure against the US Dollar (USD), driving the GBP/USD currency pair toward the vicinity of 1.3400 as the dollar’s resilience intensified. The prevailing movement in the forex market reflects a complex mix of risk appetite, trade tensions, and mounting anticipation ahead of upcoming Federal Reserve events. Importantly, the recent developments have redrawn investor priorities, centering attention squarely on tariff-related news and the evolving dynamics within the US Federal Reserve.
**Dollar Strength Reasserts Dominance**
The US Dollar has seen a broad-based strengthening against major currencies as safe-haven flows resumed and US bond yields climbed. The ongoing flight to safety, triggered by geopolitical uncertainty and global growth concerns, is lending persistent support to the dollar profile.
Key factors for the dollar’s recent strength include:
– **Robust US economic data**: Resilient economic indicators, such as strong job creation and rising consumer confidence, are helping the dollar.
– **Interest rate trajectory**: The US Federal Reserve’s stance and forward guidance have reassured markets about further tightening if the data justifies, supporting yields and attracting flows.
– **Safe-haven demand**: Escalating trade tensions and periodic risk aversion events continually prompt market participants to seek refuge in the dollar.
As the new trading week unfolds, the greenback’s gains have proven broad across the board, pressuring counterparts like the British Pound, Euro, and commodity-linked currencies.
**GBP/USD on Defensive, Drifts Toward 1.3400**
The GBP/USD pair has faced sustained downward momentum amid the renewed dollar strength, spending much of the recent session on the back foot. Price action steadily eroded from previous highs, with sellers managing to push the pair closer to the psychologically and technically significant 1.3400 support region.
The downward pressure on the pound can be attributed to several intertwined drivers:
– **Brexit uncertainty**: Although explicit headlines have lessened, questions loom large over the UK’s future relationship with the European Union, regulatory landscape, and trade arrangements.
– **UK economic data softening**: Recent figures have painted a mixed picture for the UK economy, with slow wage growth and lingering questions about inflation expectations.
– **Relative yield disadvantage**: With the US Federal Reserve expected to maintain a hawkish bias or even further its tightening, the yield gap favors the dollar over the pound.
**Short-Term Technical Analysis**
Technically, the GBP/USD currency pair faces an important test around the 1.3400 handle. The region represents not just a round number but also a confluence of support levels on various technical indicators.
Key technical observations:
– **Immediate support**: 1.3400 is the next major support. A decisive close beneath this level would reinforce bearish sentiment, exposing the next downside targets near 1.3350 and then 1.3300.
– **Resistance levels**: On the upside, initial resistance emerges near 1.3500, which has recently transformed from support to resistance. Further recovery faces barriers at 1.3560 and then 1.3600.
– **Momentum**: Short-term momentum oscillators (such as the Relative Strength Index and Moving Average Convergence Divergence) have tilted bearish, reflecting the ongoing pressure on the pair.
**Shift in Focus: Tariffs and Fed Developments**
A pivotal driver of the market narrative has been the renewed focus on fresh trade tariffs and the associated fallout on global markets. The US administration’s latest tariff announcements and the retaliatory measures from its trading partners have injected volatility and heightened uncertainty.
Key points about trade tensions:
– **US-China standoff**: The escalating dispute between the United States and China remains central, with tit-for-t
Read more on GBP/USD trading.