**GBP/USD Settles Above 1-1/2 Week Low, Posts Weekly Loss**
*By Miroslav Marinoff. Credit: TradingPedia.com*
The British Pound fell against the US Dollar last week, registering a significant weekly loss and settling just above its lowest levels in over one and a half weeks. The movement in the GBP/USD pair was primarily driven by a mix of broad-based US Dollar strength, shifting market sentiment towards risk, developments in monetary policy, and a series of crucial economic data releases from both the United Kingdom and the United States.
This article will explore the key drivers behind the recent sell-off in GBP/USD, analyze the technical outlook, review fundamentals impacting both currencies, and provide a forward-looking perspective for traders and investors.
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## Market Overview: Risk Sentiment and US Dollar Strength
– The overall market mood through the week became markedly risk-averse.
– Investors flocked towards the safety of the Greenback, pushing the US Dollar Index higher.
– Geopolitical tensions and uncertainty around global economic growth weighed on riskier currencies, including the Pound.
The US Dollar’s strength was not isolated to the move against the Pound. Throughout the basket of major currencies, the Greenback’s safe-haven appeal was on display as equity indices faltered, and concerns over potential slowdowns in China and the Eurozone fueled further caution. This trend placed sustained downward pressure on cable, with GBP/USD shedding value steadily over the course of the week.
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## UK Economic Data and Central Bank Developments
### Sluggish UK Economic Recovery
– Recent data signaled struggling economic momentum in the UK.
– The latest Purchasing Managers’ Index (PMI) reports showed the UK services sector hovering near stagnation, while manufacturing remained in contraction territory.
– Retail sales volumes dropped unexpectedly, another sign that high interest rates were squeezing consumers and restraining growth.
The persistent lack of robust economic recovery raised concerns that the UK may be more vulnerable to a sharper downturn compared to its G10 peers. This environment benefitted bearish sentiment for the Pound, as market participants began re-adjusting their expectations for further tightening from the Bank of England.
### Bank of England: Policy Caution
– The Bank of England (BoE) recently held rates steady, pausing after a long cycle of consecutive hikes.
– Policymakers signaled a more data-dependent and cautious approach ahead, with an accent on monitoring wage growth and inflation persistence.
– The statement and minutes from the BoE’s last meeting highlighted uncertainties and the need to assess policy lags.
Market reaction to the BoE’s dovish tone contributed to the pressure on GBP/USD. With economic activity weakening and inflation showing tentative signs of peaking, traders began betting that the BoE would stay on hold for a prolonged period, and some even foresaw potential cuts as 2025 approached.
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## US Economic Data and Federal Reserve Policy
### Robust US Data Supports the Dollar
– US economic statistics consistently outpaced their UK counterparts.
– The labor market remained resolutely tight, with jobless claims holding near historically low levels.
– US GDP growth figures for the preceding quarter beat market expectations.
– Inflation data indicated that price pressures, while cooling, remain sufficiently elevated to keep the Fed on alert.
### Federal Reserve: Hawkish Pause
– The Federal Reserve opted for a pause in rate hikes at their last meeting.
– Committee members signaled the willingness to raise rates again if necessary.
– The tone of Fed communications remained decidedly hawkish, highlighting the need for ongoing vigilance toward inflation.
These dynamics fueled the bullish sentiment in the US Dollar, as international investors favored the higher yields and relative macroeconomic stability of US assets. The divergence in policy outlook with the Bank of England further exacerbated the downtrend in GBP/USD.
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## Sterling’s Technical Picture
GBP/USD endured a challenging week on the technical front, giving up earlier gains and breaching several key support levels. The pair consolidated below its 50-period moving
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