GBP/USD falls towards 1.1800 on risk-off mood as sellers eye 1.1700

• GBP/USD drops below 1.1900, eyeing 1.1800, blamed on risk aversion.
• Amidst a light calendar, Federal Reserve commentary to give direction to the GBP/USD.
• GBP/USD to consolidate around 1.1800-1.2000 amid the lack of catalyst.

The Pound Sterling (GBP) strumbled sharply below the 1.1900 figure in the North American session amid risk aversion as China’s Covid-19 crisis worsens, reporting its first related death in six months, increasing worries of lockdowns in the second largest economy. In the last week, hawkish Federal Reserve (Fed) rhetoric weighed on investors, which lifted global equities from their yearly lows. At the time of writing, the GBP/USD is trading at 1.1816, beneath its opening price by 0.60%.

Risk aversion weighed on the British Pound

Equities remain downbeat, hit hard by China’s Covid-related news that three people died during the weekend, sparking fears that authorities could reimpose strict measures to curb the outbreak. The economic docket in the United States (US) revealed the Chicago National Activity index fell into negative territory in October, to -0.05 from 0.17 in September. Aside from this, even though US October CPI and PPI reports were softer-than-expected, a solid US Retail Sales report increased the chances that the Fed will continue tightening monetary conditions.

In the meantime, the US Dollar Index, a greenback gauge against a basket of currencies, jumped 0.62%, at 107.646 was a headwind for the GBP/USD.

On the United Kingdom (UK) side, the Office for Budget Responsibility (OBR) foresees a drop of 1.4% in  GDP for 2023, worst than the estimated 1.8% growth in March. Meanwhile, expectations that the Bank of England (BoE) would tighten monetary policy

What to watch

Ahead in the week, the UK economic docket Is light, awaiting S&P Global/CIPS PMIs on Wednesday. Across the pond, the US calendar will feature further Fed speaking.

GBP/USD Price Analysis: Technical outlook

After rallying towards fresh three-month highs above 1.2000, the GBP/USD retraces toward testing the September 13 swing high-turned-support at 1.1738. However, until GBP sellers clear the 1.1800, the major might consolidate in the 1.1800-1.2000, awaiting a fresh catalyst.

GBP/USD key resistance levels lie at 1.1900, followed by the 1.2000 psychological level. On the flip side, the GBP/USD first support would be the 1.1800 mark, which, once cleared, would expose the abovementioned 1.1738, followed by the 100-day Exponential Moving Average (EMA).