The GBP/USD pair enters a bearish consolidation phase during the Asian session and oscillates in a narrow band around the 1.3500 psychological mark, just a few pips above a three-week low touched on Friday. Moreover, the fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside.
A modest US Dollar (USD) pullback from its highest level since June 25 turns out to be a key factor lending some support to the GBP/USD pair.
However, diminishing odds for a near-term reduction in borrowing costs by the Federal Reserve (Fed), amid concerns that US President Donald Trump's trade tariffs would boost inflation, should act as a tailwind for the buck. Apart from this, the risk-off impulse could further benefit the Greenback's relative safe-haven status and contribute to capping the currency pair.
In a further escalation of the trade war, Trump imposed a 30% tariff on imports from Mexico and the European Union starting on August 1. This comes on top of a string of over 20 similar tariff notices Trump has issued since last Monday and a 50% tariff on US copper imports, which continues to weigh on investors' sentiment.
The anti-risk flow is evident from a generally weaker tone around the equity markets and should limit any meaningful corrective decline for the safe-haven buck and cap the GBP/USD pair.
Source: FXStreet
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