GBP/USD kicked off the week on the backfoot, testing the 1.22 handle as the dollar remains in the driving seat, and could remain vulnerable after last week's contrasting central bank meetings and with a dearth of nearby chart support.
Holding policy unchanged after 14 consecutive rate hikes, the BoE appeared dovish compared to the Fed, which signalled another increase by year end and fewer cuts in 2024.
Stagflation concerns are once again picking up in the UK with inflation at 6%, while PMIs and growth data have weakened notably in recent months.
Consequently, the pound has unwound near the entirety of its 2023 gains.
Therefore, should UK data continue to deteriorate, risks will likely remain skewed to further downside.
What’s more, techs have become increasingly bearish, as flagged previously, a close below the 200-DMA had left GBP/USD at risk of a deeper setback.
Now that the pair is through the May lows, there is little in the way of notable support until the psychological 1.20 handle.
Elsewhere, with U.S. stocks posting negative returns month-to-date, month-end flows are likely to keep the dollar in demand, thus limit rallies in GBP.
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