- Resurgent USD demand prompted fresh selling of GBP/USD on Wednesday.
- Hotter-than-expected US CPI, and a risk-off impulse further underpinned the USD.
- Brexit woes, dovish BoE weighed on the GBP and supported prospects for further losses.
The GBP/USD pair added to its intraday losses and weakened further below the key 1.3500 psychological mark in reaction to hotter-than-expected US consumer inflation figures on Wednesday.
Following a brief consolidation earlier on in the day, the GBP/USD pair met with fresh supply and extended Tuesday's retracement slide from levels beyond the 1.3600 round-figure mark. The downfall was exclusively sponsored by a strong pickup in demand for the US dollar, which drew support from rebounding US bond yields and a softer risk tone.
Intraday, USD buying picked up pace following the release of the latest US inflation figures, which showed that the headline CPI rose 0.9% MoM in October as against a 0.5% uptick anticipated. Adding to this, the yearly rate jumped to 6.2%, while the core CPI which excludes food and energy prices also surpassed market expectations by a big margin.
The data further fueled speculations that the Fed would be forced to adopt a more aggressive policy response to contain the continuous rise in inflationary pressures. This, in turn, acted as a tailwind for US Treasury bond yields, which continued underpinning the greenback and dragging the GBP/USD pair lower.
Meanwhile, worries that the UK government will trigger Article 16 of the Northern Ireland Protocol, along with the Bank of England's dovish decision last week acted as a headwind for the British pound. This was seen as another factor that contributed to the GBP/USD pair's decline below the 1.3500 mark, setting the stage for additional losses.
Technical levels to watch
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