GBP/USD Tests 5-Month Low at 1.31400 Amid UK Fiscal Concerns

GBP/USD has declined to a 5-month low of 1.31400, erasing recent gains despite maintaining a 5.40% year-to-date advance. The cable's weakness stems primarily from mounting UK fiscal worries rather than dollar strength, as investors grow increasingly concerned about Britain's budget deficit and spending plans. The psychological 1.31400 level represents a critical support zone that hasn't been breached since late May. Market participants are closely monitoring UK gilt yields, which have risen sharply, reflecting deteriorating confidence in the government's fiscal trajectory. Technical indicators suggest further downside pressure, with the next major support level at 1.31000. The pound's vulnerability has intensified ahead of the Bank of England's upcoming policy meeting, where policymakers face the challenge of balancing inflation concerns against fiscal stability. Traders should watch for any break below 1.31400, which could accelerate selling toward the 1.30500 region.