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GBP/USD Steadies at $1.2630, Eyes Key $1.2700 Resistance

Despite mixed data from the UK, the GBP/USD currency pair showed a bullish bias and remained well bid around the 1.2670 level. It was mainly supported by the weaker US dollar, which kept the GBP/USD pair higher.

GBP/USD Price Chart - Source: TradingView

The US dollar was being pressured by the risk-on market sentiment, which tends to undermine safe-haven assets like the dollar.

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Meanwhile, the losses in the US dollar could be short-lived as the Fed has shown a hawkish stance on interest rate decisions. This suggests that the Federal Reserve will likely keep rates higher for a longer period.

On the flip side, previously released mixed data from the UK is also helping the GBP/USD pair to stay bid. The PMI data suggests that the manufacturing sector improved slightly but fell short of expectations.

However, the services sector remained strong, surpassing expectations. The overall composite PMI also increased, indicating positive economic activity.

GBP/USD Outlook Amid BoE Caution and Mixed Economic Data

Despite warnings from Bank of England (BoE) policymaker Swati Dhingra regarding potential downsides to the economy due to elevated interest rates, the Pound Sterling continues to show strength in the UK market. Dhingra expressed concerns about weakened demand and increased living expenses resulting from high-interest rates, which could potentially lead to a harsh economic downturn if rate adjustments are postponed.

Hence, the warnings of a potential economic downturn due to high-interest rates pose risks for the Pound Sterling despite its current strength in the UK market.

S&P Global/CIPS UK Manufacturing PM

On the data front, the S&P Global/CIPS UK Manufacturing PMI for February was slightly above expectations at 47.1 but below the consensus of 47.5.

The Services PMI was unchanged at 54.3, beating expectations of 54.1. Dhingra’s warning has slightly increased market expectations for BoE rate cuts after Governor Andrew Bailey’s comments on reducing rates before inflation hits 2%.

Therefore, the mixed data and cautionary remarks from BoE policymaker Swati Dhingra suggest a slightly negative outlook for the GBP/USD pair, with increased expectations for potential rate cuts by the Bank of England.

GBP/USD Technical Outlook

The GBP/USD pair is exhibiting a steadfast trading pattern, currently positioned at $1.2629, displaying a slight change from the previous close.

The pivot point, delineated by the green line at $1.26042, serves as a barometer for the pair’s short-term direction. Above this pivot, immediate resistance levels are identified at $1.26687, $1.27188, and a more formidable barrier at $1.27693, which could cap upward movements.

Conversely, the pair finds support just below the pivot at $1.25796, with further cushions at $1.25372 and $1.24900 to halt any bearish momentum.

Technical indicators are providing mixed signals. The Relative Strength Index (RSI) is neutral at 52.46, suggesting a balanced force between buyers and sellers.

The Moving Average Convergence Divergence (MACD) is slightly below the signal line, indicating that while bearish momentum has been present, it is not overwhelmingly so, leaving room for potential shifts in sentiment.

GBP/USD Price Chart

Currently, the pair is navigating between a downward trendline, which is exerting resistance at the $1.2700 level, and finding interim support at $1.2600.

The proximity to the 50-day Exponential Moving Average (EMA) also adds weight to these levels, proposing a tight trading range.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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