GBP/USD slides back closer to monthly low, around mid-1.3300s

23 Nov 2021

  • Brexit woes dragged GBP/USD lower for the third successive day on Tuesday.
  • Bulls seemed unimpressed by stronger UK PMIs for the month of November.
  • Hawkish Fed expectations underpinned the USD and added to the selling bias.

The GBP/USD pair continued losing ground through the mid-European session and dropped back closer to mid-1.3300s, or monthly low set on November 12.

The impasse over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound. This, in turn, was seen as a key factor that dragged the GBP/USD pair lower for the third successive day on Tuesday. Relations between Britain and the European Union have deteriorated recently after the UK threatened to trigger Article 16, potentially leading to a trade war.

This, to a larger extent, overshadowed an upside surprise from the UK flash Manufacturing PMI, which rose to 58.2 in November from 57.8 previous. Adding to this, the gauge for the UK services sector also came in slightly better-than-expected and edged lower to 58.6 during the reported month from 59.1 in October. The data, however, failed to impress bulls or ease the bearish pressure surrounding the GBP/USD pair.

On the other hand, the US dollar stood tall near a 16-month peak and remained well supported by the prospects for an early policy tightening by the Fed. The markets bets were reinforced after US President Joe Biden formally nominated Jerome Powell to serve as the chairman of the Federal Reserve for a second term. This, along with elevated US bond yields and fresh COVID-19 jitters, underpinned the safe-haven greenback.

Meanwhile, the GBP/USD pair's inability to attract any buying suggests that an imminent Bank of England rate hike in December is fully priced in the markets and did little to impress bulls. The fundamental backdrop supports prospects for an extension of the recent downfall from levels just above the key 1.3500 psychological mark.

Market participants now look forward to the release of the flash US PMIs for some impetus during the early North American session. Apart from this, the US bond yields, along with the broader market risk sentiment will influence the USD price dynamics and allow traders to grab some short-term opportunities around the GBP/USD pair.

Technical levels to watch


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