**GBP/USD Slumps for Third Straight Day Below 1.32 Mark After Hawkish Fed Signals**
*By VT Markets Analysis Team*
Original article: [VT Markets Live Updates](https://www.vtmarkets.com/live-updates/following-a-hawkish-fed-stance-gbp-usd-has-declined-for-three-consecutive-days-below-1-32/)
The British pound’s bullish run faltered this week as the GBP/USD pair extended its decline for a third consecutive session, firmly breaking below the psychologically significant 1.32 level. This price action comes in the wake of a notably hawkish stance from the United States Federal Reserve, which continues to weigh on currency markets and intensify pressure on the pound. Market participants are now reassessing their outlooks on both the British pound and the US dollar, in light of recent central bank commentary, economic data, and evolving macroeconomic risks.
### Fed’s Hawkish Tone Sparks Broad US Dollar Strength
The Federal Reserve’s most recent policy statement and press conference sent a clear message to global financial markets: the US central bank remains committed to its tightening schedule, even as it closely monitors inflation risks and a mixed set of economic indicators.
**Highlights from the Fed’s Recent Communications:**
– **Borrowing Costs Prioritized:** The Federal Open Market Committee (FOMC) left the door open for further interest rate hikes in 2024, signaling that the fight against inflation is far from over.
– **Inflation Worries Persist:** Fed Chair Jerome Powell emphasized that the central bank will remain vigilant for upside surprises on inflation and suggested that cuts are not imminent unless clear, persistent disinflation is evident.
– **Labor Market Resilience:** Powell also acknowledged that the US labor market remains strong, reducing immediate fears of a policy-induced recession and giving the Fed more leeway to maintain its restrictive stance.
This clear messaging has fueled a rally in the US dollar across major currency pairs, as traders are recalibrating their expectations for the pace and depth of policy easing in the United States relative to other developed markets.
### GBP/USD Under Pressure: Short-Term and Structural Drivers
As the Fed boosted the appeal of holding dollars, the British pound came under renewed stress amid softening UK data and growing skepticism about the Bank of England’s (BoE) willingness to keep pace with global tightening cycles.
**Factors Weighing Down GBP/USD:**
– **Rate Differential Shifts:** The growing divergence between the Fed and BoE’s policy outlooks put the pound at a disadvantage, as investors increasingly rotate toward higher-yielding dollar assets.
– **UK Economic Slowdown:** Recent reports have illustrated a marked deceleration in the British economy, with GDP growth stalling and consumer sentiment weakening. This backdrop makes aggressive BoE tightening less likely.
– **Political and Brexit Uncertainties:** Continued uncertainty surrounding post-Brexit trade relationships and domestic political stability are keeping risk premiums elevated on UK assets.
– **Technical Barriers Breached:** The break below the 1.32 level opened the door for further downside, as key technical supports now act as resistance and encourage additional selling pressure in the absence of positive catalysts.
### US Dollar Index Breakout Adds Fuel to the Fire
The US Dollar Index (DXY), a widely watched measure of the greenback’s value against a basket of major currencies, surged this week following the Fed’s hawkish signals. The renewed uptrend in the DXY highlights broad-based dollar demand and has direct implications for GBP/USD.
**Key Takeaways on the US Dollar Index Move:**
– The DXY punched through important resistance levels, confirming a bullish technical breakout
– Dollar strength is catalyzed by a favorable mix of relatively high real yields and safe-haven inflows
– Importers and hedgers are rushing to lock in exchange rates, amplifying spot demand for US dollars globally
### Bank of England Left Playing Catch-Up?
While the British pound was undermined
Read more on GBP/USD trading.