• GBP/USD meets with a fresh supply on Monday and is pressured by resurgent USD demand.
• The UK’s bleak economic outlook undermines the GBP and contributes to the intraday slide.
• Investors now look to the FOMC and the BoE policy meetings for a fresh directional impetus.

The GBP/USD pair comes under some renewed selling pressure on Monday and extends its steady intraday descent through the first half of the European session. The pair is currently placed around the 1.1360 area, just a few pips above its lowest level since 1985 touched on Friday.

In the absence of any fresh catalyst, a bleak outlook for the UK economy continues to undermine the British pound and exerts some downward pressure on the GBP/USD pair. The UK Office for National Statistics reported on Friday that monthly Retail Sales recorded the biggest fall since December 2021 and fell much more than expected in August. This is seen as another sign that the economy is sliding into recession.

Apart from this, resurgent US dollar demand is seen as another factor contributing to the offered tone surrounding the GBP/USD pair. The stronger US CPI report released last week bolstered expectations that the Fed will tighten its monetary policy at a faster pace. In fact, the markets have been pricing in at least a 75 bps rate hike and a small chance of a full 100 bps lift-off at this week's FOMC meeting starting Tuesday.

Furthermore, the prevalent risk-off environment provides an additional lift to the safe-haven buck. The market sentiment remains fragile amid worries that rapidly rising borrowing costs, along with headwinds stemming from China's zero-covid policy and the protracted Russia-Ukraine war, would lead to a deeper global economic downturn. This, along with the worsening US-China relationship, tempers investors' appetite for riskier assets.

The aforementioned factors, to a larger extent, offsets rising bets for more aggressive rate hikes by the Bank of England, which, so far, has failed to lend any support to the GBP/USD pair. Bearish traders, however, might prefer to wait on the sidelines ahead of this week's key central bank event risks before placing fresh bets. The Fed will announce its policy decision on Wednesday and will be followed by the BoE meeting on Thursday.

In the meantime, the USD price dynamics might continue to influence the GBP/USD pair amid relatively thin liquidity on the back of a holiday in the UK in observance of the funeral of Queen Elizabeth. There isn't any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, traders might take cues from the broader risk sentiment, which will drive the USD demand and provide some impetus to the GBP/USD pair.

Technical levels to watch