GBP/USD plunges below 1.3100 on mixed sentiment and firm greenback

• The GBP/USD slides in the day by 0.75% amid a mixed market mood and firm US dollar.
• China’s Covid-19 Omicron outbreak and Russia-Ukraine discussions unchanged, keep hurting the appetite for riskier assets, weighing on the GBP.
• GBP/USD Price Forecast: Downward biased, aiming towards 1.3000.

The British pound begins the week plummeting 100-pips amid broad US dollar strength in the financial markets, courtesy of higher yields as market players expect a 50 bps increase to the Federal Funds Rate (FFR) by the US central bank. Alongside that, the market mood is mixed as European bourses rise, while across the pond, equities fluctuate. At the time of writing, the GBP/USD is trading at 1.3078.

The buck remains firm, while China's and Eastern Europe's conflict weighs on sentiment

The US Dollar Index, a gauge of the greenback’s value vs. a basket of rivals, advances 0.42%, reclaims the 99 mark at 99.220, while the US 10-year T-note yield declines six basis points down to 2.429%.

Factors like China’s Covid-19 Omicron outbreak and the continuation of the conflict between Russia and Ukraine keep investors uneasy. The Russian Foreign Minister Lavrov said that a meeting between Zelenskiy and Putin would be counter-productive, while the Kremlin emphasized that there has been no progress.

In the mid-European session, Bank of England’s Governor Andrew Bailey crossed the wires in an event held in Brussels. Bailey said that “swings in commodity markets after Russia’s invasion of Ukraine posed a risk to financial stability, and the challenges facing the world economy are bigger than after the global financial crisis,” per Reuters.

Furthermore, he added that the rise in energy prices would be the most significant since the 1970s. When asked about hiking rates in the May meeting, the BoE Governor said that the situation is “very volatile” after Russia’s invasion of Ukraine, lifting energy prices higher.

Aside from this, the US economic docket featured Goods Trade Balance for February, which came at  $-106.59B lower than January’s $-107.57B.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is still downward biased, and Monday’s fall extended beyond December 8, 2021 lows at 1.3160 and November 13, 2020, daily low at 1.3105, as selling pressure mounts in the pair, as GBP bears eye the 1.3000 figure. Furthermore, crossing the 50-day moving average (DMA) under the 100-DMA, each at 1.3381 and 1.3392, adds fuel to the downward move.

With that said, the GBP/USD first support would be March 15, 1.2999. Breach of the latter would expose November 2, 2020, daily low at 1.2853, followed by September 2020 lows at 1.2675.