GBP/USD testing offers near 1.3100 ahead of UK manufacturing PMI, US NFP

• Bias leaning to the downside amid dollar comeback and increased odds of no deal Brexit.
• US-China trade optimism appears to limit the downside heading into the UK PMI and US NFP

The GBP/USD pair trades modestly flat near the 1.31 handle heading towards the London opening, as the upside attempts continue to get sold-off ahead of the last amid broad-based US dollar rebound and looming Brexit uncertainty.

The greenback staged a solid comeback and traded near two-day tops vs. its main rivals in Asia, in the wake of upbeat US housing data and the risk-on rally in the US equities amid fresh progress made on the US-China trade talks. Further, a round of profit-taking on the USD shorts amid dovish Fed is also another reason for limited upside in the Cable.

On the GBP-side of the equation, the bulls remain cautious, as markets are already pricing-in a no-Brexit deal, as the UK PM May is likely to return to the negotiation table on the backstop issue with the European Union (EU). In the view of Valeria Bednarik, FXStreet’s Chief Analyst, “yet unless she has a material alternative to offer to the Union, the trip will be to no avail.”

Attention now turns towards the UK manufacturing PMI data and the US payrolls for further trading impetus on the spot. “This Friday, the UK January Markit Manufacturing PMI is expected to come at 53.5 vs. 54.2 previously, adding to Sterling negative tone”, Valeria adds.

GBP/USD Technical Levels