GBP/USD fell on Wednesday after data showed UK manufacturing activity expanded in May at the weakest rate since January 2021, adding to a string weak economic reports that leave sterling vulnerable to testing this year's low if 21-day moving average support breaks.
Cable was trading down 0.8% at 1.2500, continuing to back away from its recent trend high of 1.2667 as rising UK inflation, weak domestic growth and troubled global prospects arouse a broad safe-haven dollar bid.
The risk for sterling is that weak growth shifts the BoE to a more dovish rate outlook to bolster an economy suffering a cost-of-living crisis.
With the Fed rate-hike outlook outstripping the BoE -- by a 191bps to 139bps margin by December -- the pound is likely to remain under pressure.
Erosion of BoE expectations could undermine support at the 21-DMA by 1.2455.
A close below 1.2411, the 50% Fib of the May rise from 1.2156 to 1.2667, would put bears in control and open the way for a test of the May 2020 low by 1.2075.
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