The Pound Sterling (GBP) remains on a bearish trajectory as investors worry about the UK’s economic outlook. The GBP/USD pair weakens further as a persistent Consumer Price Index (CPI) and a restrictive interest rate policy by the Bank of England (BoE) continue to accelerate the burden on households. The outlook for the GBP/USD pair worsened further as the UK’s Services PMI remained below the 50.0 threshold for the second straight month in September in an S&P Global preliminary PMI report. Like the Federal Reserve (Fed), the BoE vowed to keep interest rates sufficiently high for a longer period.
Unlike the US Dollar, the Pound Sterling is facing an intense sell-off as risks of a recession in the UK economy are skewed to the upside. Market participants expect UK PM Rishi Sunak to fail to keep his promise of halving inflation to 5.3% by year-end as the BoE seems done with hiking interest rates. Pound Sterling extended a four-day losing spell on Tuesday as the risk appetite of market participants weakened amid deepening UK slowdown fears. The GBP/USD pair drops below the round-level support of 1.2200, printing a fresh six-month low near 1.2170. The pair is expected to deliver more weakness. A bear cross, represented by the 20 and 200-day Exponential Moving Averages (EMAs), warrants more weakness ahead. Momentum oscillators have reached oversold levels.