GBP/USD extends slide, heads for lowest weekly close since 1985

• The pound remains under pressure amid fears about the consequences of a no-deal Brexit. 
• US Dollar posts mix results across the board, down versus most G10 currencies. 

Late on Friday, the Pound extended losses across the board with EUR/GBP approaching 0.9300 and GBP/USD hitting fresh 2-year lows under 1.2050. 

GBP down on Brexit and also data 

Cable remains under pressure mainly because of Brexit. On Friday, particularity a weaker-than-expected reading on UK GDP added extra weigh. The economy contracted by 0.2% during the second quarter. It is about to post the fourth weekly decline in-a-row and the lowest close on that chart since 1985. On Friday, it broke a 6-day range, adding another leg lower to the move that started mid-July. The Brexit drama is lately to continue to be the key driver. 

“Next week in the UK, the labour market report for June is due out on Tuesday and CPI inflation in July is due out Wednesday. While the releases are important, the focus remains on Brexit and how it will develop over the autumn. Right now, the Brexiteers and remainers are discussing whether or not Parliament is able to block a ‘no deal’ Brexit from happening automatically. We still consider another extension or snap election (which would also likely require an extension) as the two most likely outcomes but we cannot rule out a no deal Brexit happening by accident”, wrote Dankse Bank analysts. 

The US Dollar is down from the level it had a week ago against majors. The DXY dropped sharply on Monday, mainly affected by the slide in USD/JPY and the rally in EUR/USD, and then trimmed losses. Lower US yields and the escalation in the trade war impact on the DXY that is hovering around 97.50, after opening on Monday above 98.00. 

GBP/USD Key levels 

Yohay Elam, analyst at FXStreet, considers that 1.2075 is a critical battle line, followed by the round number of 1.2000 “psychologically essential” and below comes the flash crash low from early 2017, 1.1985. “The next line is the lowest ever for cable – 1.1866 seen in late 2016.”

Looking up, the past week's peak of 1.2210 caps the pair. The post-crash recovery high of 1.2250 follows it. The next lines are from late July: 1.2380 and 1.2420, which have both provided support. The round number of 1.2500 is next”, explains Elam.