The British Pound has been under continued pressure against the US Dollar, with prices recently tumbling to multi-week lows around the 1.3500 handle. The GBP/USD has reached a new three week low. This drop is entirely due to UK GDP coming in considerably weaker than expectations. Supporting this narrative has been the strengthening of the US Dollar, which has gained safe-haven flows as market uncertainty continues to rise.
Indeed, frequent complaints have arisen in the UK recently as national GDP figures have consistently come in below expectations. This announcement is placing additional downward pressure on Pound Sterling. The market clearly viewed this as a negative surprise, triggering a knee-jerk sell-off in GBP/USD, which has since found its level closer to 1.3500. This drop further shines a light on the ongoing economic crisis gripping the UK. Analysts have been all eyes on how all these numbers will translate into future monetary policy.
The US Dollar is very strong as global uncertainties continue. The Dollar’s strength comes from its safe-haven currency, the go-to for investors looking for a safe place to keep their money when times get tough. This dynamic has largely fueled the USD’s appreciation against other currencies, including the Euro. The EUR/USD has continued to trade under the 1.1700 level. It finds it hard to get any traction with the US Dollar still strong.
Alongside the markets’ response to these developments, gold prices saw a significant surge as well. Gold continued to breakthrough the $3,350 level, building bullish momentum as risk aversion increased among investors. The precious metal’s increase is a result of its classic response to economic turmoil and currency devaluation.
The new GBP/USD and EUR/USD price action speak to the new reality of relative strength as a new dynamic in global currency markets. With the UK facing economic headwinds and the US Dollar benefiting from safe-haven demand, traders remain cautious about potential future movements.