GBP/USD flirts with daily low, around 1.1300 mark amid notable USD demand

• GBP/USD attracts fresh sellers at higher levels and is pressured by a combination of factors.
• Reduced bets for a jumbo BoE rate hike in November act as a headwind for the British pound.
• The emergence of fresh USD buying also contributes to the offered tone surrounding the pair.

The GBP/USD pair struggles to find acceptance above the 1.1400 mark on Monday and faces rejection near the 50-day SMA. The intraday descent drags spot prices to a fresh daily low during the early European session, though bulls manage to defend the 1.1300 round figure, at least for the time being.

Against the backdrop of the recent political turmoil in Britain, a bleak outlook for the UK economy continues to act as a headwind for the British pound. The worries were fueled by the disappointing release of the flash UK PMI prints, showing that business activity in both manufacturing and services sectors contracted at a faster pace in early October.

In fact, the gauge for the manufacturing sector declined to 45.8 from 48.4 and the Services PMI fell to 47.5 from 50 during the reported month, both missing estimates. The data reduces the odds of a bigger 100 bps rate hike by the Bank of England (BoE) in November and supports prospects for further losses for the GBP/USD pair amid resurgent US dollar demand.

As investors look past reports that some Fed officials are signalling greater unease with oversized rate hikes, the USD makes a solid comeback amid a fresh leg down in the equity markets. Concerns about the economic headwinds stemming from rapidly rising borrowing costs, geopolitical risks and China's strict zero-COVID policy weighs on investors' sentiment.

The aforementioned fundamental backdrop adds credence to the negative outlook for the GBP/USD pair, Bearish traders, however, might wait for sustained weakness below the 1.1300 mark before placing fresh bets. Market participants now look forward to the flash US PMI prints. The data might influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch