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Pound Sterling faces selling pressure

The Pound Sterling (GBP) faces a sell-off on Tuesday, paring some gains from the recent rally, as risks of a slowdown in the United Kingdom economy are unabated due to higher interest rates by the Bank of England (BoE). The GBP/USD pair recovered sharply on Friday and Monday but struggled to maintain strength and trades around 1.2330 amid an absence of fundamental cushion for the Pound Sterling. The recent recovery in the Cable was backed by an improvement in the market sentiment due to expectations of no more interest rate hikes from the Federal Reserve (Fed) and no further escalation in Middle East tensions. However, risks of the UK economy entering into a recession are high as sectors including manufacturing, services, and housing are struggling to absorb the effect of higher interest rates by the BoE. Already weak British consumer spending is expected to worsen further as individuals face an escalating cost of living crisis.

Pound Sterling extends its correction to near 1.2300 after facing selling pressure above the crucial resistance of 1.2400. The 200-day Exponential Moving Average (EMA) around 1.2400 has been acting as a critical barrier for the Pound Sterling bulls. The Cable is gradually declining after a breakout of the symmetrical triangle chart pattern formed on a daily time frame, which is a general course of action. Fresh buying in the GBP/USD pair could appear after completing the correction to near the 50-day or 20-day EMAs.