GBP/USD falls sharply toward 1.3400 as dollar capitalizes on safe-haven flows

• GBP/USD turned south after trading above 1.3500 earlier in the day.
• British pound is struggling to find demand despite the upbeat Retail Sales data.
• US Dollar Index is testing 96.00 as market mood sours.

The GBP/USD pair spent the Asian session in a relatively tight range near 1.3500 but came under strong bearish pressure during the European trading hours. As of writing, the pair was down 0.5% on a daily basis at 1.3420.

Earlier in the day, the data published by the UK's Offıce for National Statistics revealed that Retail Sales in October rose by 0.8% on a monthly basis. This reading came in higher than the market expectation for an increase of 0.5%. Although the initial market reaction helped the British pound gather strength, the negative shift witnessed in market sentiment forced the pair to reverse its direction.

DXY gains traction ahead of the American session

Reports of Austria going into a full lockdown due to the rising number of coronavirus cases revived concerns over the global economic activity slowing down in winter. US stock index futures turned south and the US Dollar Index climbed to 96.00 area, reflecting the dismal market mood.

There won't be any high-tier macroeconomic data releases featured in the US economic docket in the remainder of the day and the risk perception is likely to continue to drive the financial markets.

Meanwhile, Northern Ireland protocol negotiations are set to continue in Brussels on Friday and investors will keep a close eye on fresh Brexit headlines ahead of the weekend.

Key technical levels to watch for