GBPUSD opened with a bearish gap on Monday, trying to cling to the 1.30 level after a brief dip to nearly one-week lows around 1.2960. in the weekly charts, the cable continues to struggle following three weeks of declines in a row. After a strong rejection from the levels above 1.31 on Friday, traders the UK currency failed to attract demand at lower levels and may see further losses in the short term, especially on the back of the resurgent dollar strength, with the greenback is gaining against most counterparts on Monday, supported by the improving economic data out of the United States.
The pound, meanwhile, has been under pressure despite Brexit uncertainty has abated after the general election. The main bearish driver for the cable now is a poor economic picture in the UK. Following dismal GDP numbers and CPI data which pointed to inflation falling to the lowest levels in three years, retail sales pointed to a sharp decline in consumer spending. The weak figures in turn fuel expectations of a rate cut by the Bank of England during the meeting later this month. As such step is not priced in yet, sterling may extend losses further in the near term.
Now, traders shift focus to the UK Markit purchasing manager’s index data for the manufacturing and service sectors due this week. The numbers may be the key in determining further action by the central bank. Strong figures will reduce the possibility of a rate cut and thus may lead to a recovery in GBPUSD. In this scenario, the pair will easily climb back above the 1.30 barrier and could even regain the 1.31 level should the price break the 1.3080 intermediate resistance.
On the other hand, should the negative sentiment surrounding the cable persist, we may see further losses in cable. In a bearish scenario, the pair may challenge the 1.2950 region and extend losses below 1.29, especially if the greenback demand remains strong. The inability to regain the 1.30 level in the near term will reaffirm a negative outlook for the British currency. The pair needs to overcome at least the 200-weekly moving average around 1.3060 in order to see a weaker downside pressure.