The GBP/USD pair is struggling near its lowest level since mid-May, with bears awaiting a sustained break below the 100-day SMA. The Bank of England’s dovish pause last week has lifted bets for an interest rate cut in August, adding pressure on the British Pound. Additionally, the flash UK PMIs released on Friday showed slow business activity growth in June, further weighing on the GBP/USD pair. On the other hand, the USD climbed to its highest level since May 9, exerting more pressure on the pair.
The Federal Reserve’s hawkish surprise earlier this month, forecasting only one rate cut this year, has led to an uptick in US business activity in June. This, combined with a cautious market mood lifting the safe-haven USD, has contributed to the downward trend of the GBP/USD pair. However, the lack of follow-through selling suggests caution for bearish traders, as market participants are still pricing in the possibility of two interest rate cuts by the Fed in 2024 due to easing inflationary pressures in the US.
Traders are keeping an eye on the upcoming UK general election on July 4 and the absence of any relevant macroeconomic releases on Monday. These factors may lead to a cautious approach in placing aggressive directional bets in the market. Despite the current challenges facing the GBP/USD pair, the potential for a limited downside due to the uncertainty surrounding Fed rate cuts and the upcoming UK election could provide some relief for the pair.
Overall, the GBP/USD pair remains under pressure as the GBP is undermined by the BoE’s dovish stance and slow business activity growth in the UK. Meanwhile, the USD’s strength, fueled by the Fed’s hawkish stance and positive US economic data, continues to weigh on the pair. Traders are advised to monitor market developments closely, especially in light of upcoming events such as the UK general election, to navigate through the current uncertainties in the GBP/USD pair.
