GBP/USD declines below 1.3800 amid USD strength

• GBP/USD remains pressurized in the Asian session.
• US dollar Index stands at 10 weeks high at 92.33.
• GBP remains under pressure amid Brexit chaos and delayed economic reopening

GBP/USD continues to trade lower on Monday while trailing the previous seven session’s downside movement. The pair trades in a very narrow trade band before slipping below the 1.3800 mark.

At the time of writing, GBP/USD is trading at 1.3790, down 0.12% for the day.

The US treasury yields continue to retreat after investors digested the Fed hawkish inflation and interest rates outlook. The yield curve flattens as the short term bond yields are rising more than the benchmark 10-year bond yields. The short term bond yields are more sensitive to the rate changes.

The US Dollar Index (DXY)  stands strong, however it experiences minor pullback following the fall in US treasury yields. The US dollar also gains as the risk sentiment deteriorates with falling equities and commodity prices.

It is worth noting that S&P 500 Futures were trading at 4,129, down 0.58%. 

Market participants ditched sterling after the extended lockdown in the UK as the country failed to hold on to the existing plan of full economic reopening on June 21 due to rising corona cases.

Meanwhile, the UK Retail Sales fell unexpectedly in May.  The headline inflation rate rose more than expected in May to the highest level since July 2019 and above the Bank of England (BOE) target of 2.0%.

Brexit could unleash havoc on the UK steel industry as warned by Tories. The cheap foreign imports in the name of a free trade agreement between the UK and EU under Brexit protocol could harm the domestic steel manufacturers. This, in turn, soured the sentiment surrounding the sterling.

In the absence of a strong macroeconomic catalyst, the dynamics around the US dollar continue to influence the pair’s performance in the near future.

GBP/USD additional levels