GBP/USD Hits 2 Month Low! Key Levels to Watch for GBP Traders

The GBP/USD pair continues its downward trajectory, extending its losses to hit the lowest level since November 2023, trading around 1.2125 during the Asian session on Monday. The currency pair remains under significant bearish pressure as market sentiment leans heavily toward concerns over the United Kingdom's economic challenges, including stagflation risks and deteriorating fiscal health. Adding to the downside momentum, the US Dollar (USD) continues to gain strength amid robust bullish factors, further compounding the British Pound's (GBP) underperformance.

Key Factors:

1. UK Economic Concerns

The British Pound is under pressure as fears of stagflation—a combination of stagnant economic growth and high inflation—intensify. The UK economy has been struggling with sluggish GDP growth, persistent inflation, and rising borrowing costs, raising alarms among investors. Compounding these issues are concerns over fiscal health, as the UK government faces mounting challenges in balancing its budget while addressing economic stagnation.

2. USD Strength and Federal Reserve Policy

On the other hand, the US Dollar continues to attract investors as expectations rise that the Federal Reserve will maintain its current interest rate levels. With inflation remaining relatively steady in the US and recent economic data showing resilience, the Fed's hawkish stance bolsters the USD. This divergence in monetary policy outlooks between the Federal Reserve and the Bank of England only adds to the GBP/USD pair's downside risks.

The combination of a struggling UK economy and a robust US Dollar creates a challenging environment for the GBP/USD pair, with market participants closely monitoring upcoming economic data and central bank statements for further direction.

The Relative Strength Index (RSI) is below 30, signaling oversold conditions. A shortterm rebound or consolidation could occur before further declines.

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