- Traders rushed for safety amid fears of a US recession.
- Data on Friday revealed a sharp slowdown in US job growth in July.
- The pound remained fragile after the Bank of England cut interest rates last week.
The GBP/USD outlook favors the bears, with the pound hovering near one-month lows on poor market risk appetite. Investors are dumping risky assets amid a wave of global economic uncertainty.
Traders rushed for safety on Monday amid fears of a US recession. Moreover, there were concerns about China’s economy, which was performing poorly. In particular, data on Friday revealed a sharp slowdown in US job growth in July. The economy added a less-than-expected 114,000 jobs, while the unemployment rate rose to 4.3%.
The numbers sent Fed rate cut bets up, with investors now expecting a 50 basis point cut in September. Moreover, recent data from the US revealed cooler than expected inflation. Therefore, if inflation declines and the economy worsens, the Fed may not be able to achieve a soft landing. Moreover, there is now more pressure on the central bank to reduce borrowing costs.
This trend of weak economic performance is spreading to major economies. The period of high inflation is coming to an end. Policymakers are now grappling with the effects of prolonged high interest rates. As a result, there is increased economic uncertainty, which hurts risk appetite.
In addition, the pound remained fragile after the Bank of England cut interest rates last week. This was the first rate cut by the central bank in four years. Moreover, investors expect another reduction before the end of the year.
GBP/USD key events today
GBP/USD Technical Outlook: RSI indicates bearish corrective move
On the technical side, the GBP/USD price fell after retesting the 30-SMA resistance. The downtrend remains intact as the price remained below the 30-SMA. At the same time, the RSI was trading below 50 in bearish territory.
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However, while the price was making consistently lower lows, the RSI was trading sideways. Therefore, the bearish momentum has plateaued, indicating a corrective move. If there is no momentum building, the bulls could take control with a break above the 30-SMA. However, if the bears remain in control, the price will break below the 1.2700 level to make new lows.
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