GBP/USD stays pressured near two-year low around 1.1900, BOE’s Bailey eyed

• GBP/USD struggles to recover from the lowest levels since March 2020.
• Multiple key UK politicians have applied for British President’s seat, tax cuts appear as the key promotion.
• Broad fears of inflation, recession join UK retailers’ biggest squeeze since pandemic to weigh on prices.
• BOE’s Bailey, risk catalyst will be important for near-term directions.

GBP/USD bears flirt with the 1.1900 threshold during Tuesday’s Asian session, after refreshing the two-year low around 1.1845 the previous day. The Cable pair’s latest losses could be linked to the political moves in the UK, as well as fears of recession.

That said, multiple key British diplomat ranging from ex-Chancellor Rishi Sunak to Foreign Secretary Liz Truss, not to forget present UK Finance Minister Nadhim Zahawi, all are in the race to become the British President after sacking Boris Johnson. While Brexit is the key aspect to favor the candidature, tax cuts are being heard as the promise to win the favor.

Elsewhere, British shoppers cut back on spending for the third month in a row and sales volumes fell by the most since they were hit hard by the COVID-19 pandemic as surging inflation squeezed the economy, an industry survey showed on Tuesday per Reuters.

It should be noted that Bank of England (BOE) Governor Andrew Bailey said, per Reuters, "UK is facing a very big real income shock." The news also exert downside pressure on the GBP/USD prices amid economic fears in the nation.

On a broader front, the all-time high US inflation expectations and comments from the US policymakers suggesting more pain ahead escalated the fears of economic slowdown, which in turn propelled the risk-off mood and drown the GBP/USD prices. That said, one-year US inflation expectations jumped to the record high of 6.8% in June, versus 6.6% prior, per the NY Fed’s survey of one-year-ahead consumer inflation expectations. Also contributing to the market’s pessimism are the hopes of Fed’s aggression, previously backed by the latest US jobs report. As per Friday’s release, the US Nonfarm Payrolls (NFP) rose by 372K for June, versus expected 268K and downward revised 384K prior while the Unemployment Rate remained unchanged at 3.6%.

Against this backdrop, equities remained depressed and the US Treasury yields kept flashing recession fears. Further, S&P 500 Futures track Wall Street losses by the press time.

Moving on, the second round of testimony from BOE Governor Bailey will be important for the GBP/USD traders to watch. However, major attention will be given to risk catalysts like political updates and inflation fears.

Technical analysis

A two-month-old support line, around 1.1840, restricts short-term GBP/USD downside amid the oversold RSI (14).