GBP/USD slides back closer to weekly lows, hovers around mid-1.3500s

The GBP/USD pair continued losing ground through the first half of the European session and slipped below mid-1.3500s, back closer to weekly lows in the last hour.

The pair came under some renewed selling pressure on Wednesday and snapped four consecutive days of the winning streak to one-week tops, around mid-1.36000s touched in the previous day. A combination of factors assisted the US dollar to gains strong follow-through traction, which was seen as a key factor that exerted heavy pressure on the GBP/USD pair.

The USD continued drawing support from firming market expectations that the Fed would begin rolling back its massive pandemic-era stimulus as soon as November. The markets also seem to have started pricing in the possibility for a Fed rate hike move in 2022 amid worries that the continuous surge in oil/energy prices will stoke inflation.

Apart from this, fragile US-China trade ties, China Evergrande’s debt crisis and a stalemate over the US debt ceiling triggered a fresh wave of the global risk-aversion trade. This, along with a strong move up in the US Treasury bond yields, continued acting as a tailwind for the safe-haven greenback and prompted fresh selling around the GBP/USD pair.

The British pound was further weighed down by renewed tensions between Britain and France over post-Brexit fishing rights. In the latest development, French Finance Minister Bruno Le Maire stated that France will define an action plan on UK and fishing on October 15. Adding to this, the ongoing fuel crisis in the UK further undermined the sterling.

Market participants now look forward to the release of the US ADP report on private-sector employment for some impetus later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.

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