Market Analysis

The GBP/USD pair starts the new week with subdued trading, hovering near its lowest level since mid-May reached on Friday around the 1.2635 mark. Bears are eyeing a sustained break below the 100-day Simple Moving Average (SMA) to potentially extend the recent pullback from its multi-month peak.

The British Pound (GBP) remains under pressure following the Bank of England's (BoE) cautious stance last week, increasing expectations of a rate cut at the upcoming August monetary policy meeting. Additionally, the flash UK PMIs released on Friday indicated the slowest private sector business activity growth since last November. These factors, coupled with ongoing US Dollar (USD) strength, are weighing on the GBP/USD pair.

In contrast, the Federal Reserve's (Fed) unexpectedly hawkish stance earlier this month, forecasting only one rate cut this year, has boosted the USD. Friday's data showing a rise in US business activity to a 26-month high in June further supports the Dollar. Moreover, a cautious market sentiment is driving demand for the safe-haven USD, contributing to the GBP/USD's downward pressure.

Despite concerns about two potential Fed rate cuts in 2024 due to easing US inflationary pressures, which could cap further USD gains, downside risks for the GBP/USD pair persist. Traders are exercising caution, refraining from aggressive bets ahead of the UK general election on July 4 and amid a lack of significant macroeconomic releases on Monday.

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Paraphrasing text from "FX Street" all rights reserved by the original author.