GBP/USD testing post BoE lows as Brexit, BoE risks weigh

• GBP/USD bears are stepping up in droves as Brexit woes dig in. 
• US CPI sent the greenback on a tear and the divergence between BoE and the Fed is taking its toll on GBP.

Sterling is still reeling from the affects of the the Bank of England's decision on 4 Nov to hold the bank rate at 0.1%. However, data in the US on Wednesday turned the screw and sank cable even lower at the same time that Brexit woes ave reared their ugly head.

At the time of writing, GBP/USD is sitting at 1.3407, up from the lows of the day so far, printed at 1.3398 in te last hour and down from 1.3419 the highs. Cable extended the overnight drop in a follow through from negative sentiment surrounding Britain's and the European Union tustle over the  post-Brexit agreement on Northern Ireland.  

GBP/USD bearish fundamentals in play

"Downside risk may emerge for the pound in the coming days as it looks increasingly likely that the UK will unilaterally suspend parts of the Northern Ireland Protocol," analysts at ING reported overnight in a note.

Sterling went on to break the five-week low touched after BoE surprised investors last week by leaving its main interest rate unchanged at 0.1%. It was helped along by best that the Federal Reserve will need to hike rates sooner than expected following a surprisingly strong US Consumer Price Index print. It was a result that had markets wrong footed.

The dollar DXY soard against a basket of currencies after data showed that CPI had surged at their highest rate since 1990. The outcome boosted speculation the Federal Reserve could change its view that inflation is transitory and raise interest rates.

Meanwhile, markets are now pricing in a December interest rate hike by the BoE. However, other findamematls are playing their roln in the pound's downfall and uncertainty around the BoE still remains high. "Despite the prospect that the Bank may still choose to raise rates next month, its recent downward revision to the UK growth outlook and its expectation that unemployment will be trending higher by 2024 is suggestive of a cautious policy outlook," argued Jane Foley, head of FX Strategy at Rabobank.