Pound Sterling extends downside against US Dollar as Sino-US trade tensions recede

• The Pound Sterling falls further to near 1.3370 against the US Dollar, slides for the third consecutive day.
• Receding US-China trade tensions improve the US Dollar's appeal.
• This week, investors will pay close attention to the UK-US CPI data for September.

The Pound Sterling (GBP) extends its losing streak against the US Dollar (USD) for the third trading day on Tuesday. The GBP/USD pair slides further to near 1.3370 as the US Dollar extends its recovery move amid growing expectations that the United States (US) and China will reach a trade deal soon.

During the press time, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades 0.25% higher to near 98.85.

On Monday, US President Donald Trump expressed confidence that China will make a deal with Washington after his meeting with Chinese leader Xi Jinping at the sidelines of Asia Pacific Economic Cooperation summit in South Korea later this month.

"I think we're going to end up having a fantastic deal with China," Trump said and added, "It's going to be a great trade deal. It's going to be fantastic for both countries, and it's going to be fantastic for the entire world," Bloomberg reported.

Trade tensions between the US and China triggered after Beijing announced export controls on rare earth minerals. In response, the US imposed additional 100% tariffs on imports from China.

Daily digest market movers: Pound Sterling weakens against US Dollar ahead of UK-US CPI data

• The Pound Sterling trades lower against the US Dollar early in a week that will see the United Kingdom (UK) and the United States (US) CPI data, which will be published on Wednesday and Friday, respectively.
• Inflation in the UK economy is expected to have grown at a faster pace in September, a scenario that might force the Bank of England (BoE) to perform a delicate balancing act between higher price pressures and cooling job market conditions in upcoming monetary policy meetings.
• The Office for National Statistics (ONS) is expected to show that the headline CPI rose at an annual pace of 4% in September, in line with BoE's prediction, and compared to previous 3.8%. The UK central bank stated in September's meeting that inflationary pressures would peak around 4% in the current month. Meanwhile, the core CPI - which excludes volatile items - is estimated to have grown at a faster pace of 3.7% against 3.6% in August.
• Last week, BoE Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, warned of upside inflation risks and urged caution on further interest rate cuts. Mann added that labor market conditions have weakened only at a moderate pace, which do not signal urgency on interest rate cuts. "What has transpired is that the labour market has modestly loosened but it is not falling off of the cliff," Mann said.
• Meanwhile, price pressures in the US economy are expected to have grown at a slightly faster pace in September. The US headline CPI is estimated to have grown at a faster pace of 3.1% against the prior reading of 2.9%, with core readings rising steadily by 3.1%. Month-on-month headline and the core CPI are expected to have risen by 0.4% and 0.3%, respectively.
• Ahead of the US inflation data, traders seem confident that the Federal Reserve (Fed) will reduce interest rates in its both two monetary policy meetings remaining this year, according to data from the CME FedWatch tool.

Technical Analysis: Pound Sterling slides below 1.3400

The Pound Sterling falls further to near 1.3370 against the US Dollar on Tuesday. The GBP/USD pair struggles to return above the 20-day Exponential Moving Average (EMA), which trades around 1.3417.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, which indicates a sideways trend.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the psychological level of 1.3500 will act as a key barrier.