The GBPUSD exchange rate dropped to 1.354, its lowest level in over two weeks, following reports of the UK economy shrinking for the second consecutive month. Weak economic growth became the main driver behind the pound's decline, fueling concerns about a potential return to recession.
The UK economy continues to show weakness, shrinking by 0.1% in June. This marks the second consecutive month of negative GDP growth, raising investor concerns about Britain's economic health. Following this data, markets are now pricing in potential monetary policy easing by the Bank of England to stimulate growth. This situation is reducing demand for the pound, putting additional downward pressure on its exchange rate.
Fiscal policy isn't helping either. The UK government is grappling with rising public debt from pandemic relief measures. This limits options for further economic support and adds more pressure on the pound, fueling negative sentiment in currency markets.
Meanwhile, the dollar is getting a boost from US geopolitical moves. After imposing tariffs on several countries, markets recognized President Trump’s determination to follow through on his promises, increasing demand for the greenback. Additionally, strong US labor market data, including a drop in jobless claims, confirms the economy’s resilience. These factors allow the Fed to keep interest rates steady despite trade tensions, making the dollar even more attractive to investors.
The technical picture confirms a bearish scenario. The GBPUSD pair is declining, supported by technical indicators on the H4 chart. The moving averages (EMA (20) and EMA (50)) are falling, indicating that buyers are losing strength. Both lines of the stochastic oscillator are moving downward. Additionally, the blue line (%K) has crossed below the red line (%D), confirming strong bearish momentum. Overall, technical indicators suggest further downside for GBPUSD, with a possible short-term correction if the stochastic approaches oversold levels.
Current recommendation:
Sell GBPUSD at the current price. Take profit — 1.34480. Stop loss — 1.36000.
This content is for informational purposes only and is not intended to be investing advice.
