The GBP/USD currency pair has been persistently losing value, undermined by the strong bullish sentiment surrounding the US Dollar. As of the latest reports, the pair has dropped to its lowest point since November 2023, trading around the 1.2125 region during Monday's Asian session. The decline marks the fifth consecutive day of losses, with the currency pair approaching the critical 1.2100 level.
The US Dollar's strength stems from several factors, including expectations that the Federal Reserve will pause its rate-cutting cycle. This pause is seen as a positive development for the Dollar, attracting investors and fueling its demand. Meanwhile, the Relative Strength Index (RSI) on the daily chart for GBP/USD has slipped below the 30 mark, suggesting a potential near-term consolidation or rebound.
In contrast, the British Pound faces headwinds due to concerns about stagflation in the UK economy. Stagflation, characterized by stagnant economic growth alongside rising inflation, poses significant challenges for the Pound's performance. Additionally, the UK's fiscal health remains a concern, further weighing on the British currency's outlook.
The GBP/USD pair has come under intense selling pressure amid these dynamics and is anticipated to test sub-1.2100 levels. Unrelenting demand for the US Dollar continues to drive the pair downward as risk-off flows persist in global markets. Investors are also wary of potential policy uncertainties following former President Donald Trump's administration, contributing to the heightened USD buying sentiment.
Despite the downward trajectory of the GBP/USD pair appearing robust, a slightly oversold RSI on the daily chart calls for caution among aggressive bearish traders. The pair's current position below a certain handle makes it vulnerable to further declines, potentially targeting levels observed in October 2023 through the 1.2035 region.
However, should market conditions shift favorably for GBP/USD, a rebound could see the pair aiming towards the 1.2245-1.2250 intermediate hurdle before attempting to reclaim the 1.2300 round figure. Such a move would require a reversal in current trends and an easing of pressure on the British Pound.
The GBP/USD pair's current predicament highlights ongoing economic challenges faced by both the UK and global markets. With investors keeping a keen eye on developments from central banks and economic indicators, any shifts in monetary policy or fiscal responses could significantly impact currency valuations.