GBP/USD drops below 1.3220 area, remains on track to post weekly gains

• The manufacturing sector in the UK loses momentum in February.
• The upsurge in T-bond yields lifts the greenback.
• US Dollar Index rises toward 96.50 area.

The British pound weakened against the dollar for the second straight day on Friday and the GBP/USD pair slumped to a daily low of 1.3212. As of writing, the pair is losing 0.33% on a daily basis at 1.3218.

Earlier today, the Markit Manufacturing PMI report from the UK came in at 52 in February’s final reading to  weigh on the pound sterling. Commenting on the data, “The PMI indicates the US manufacturing sector is growing at its weakest rate for one and a half years, with firms reporting a marked easing in production growth in February, linked to a similar slowdown in order book growth,”  Chris Williamson, Chief Business Economist at IHS Markit said.

In the second half of the day, despite the disappointing ISM and Markit Manufacturing PMI figures from the U.S., a strong jump in the T-bond yields helped the greenback outperform its rivals and forced the pair to extend its slide. At the moment, the DXY is up 0.18% on the day at 96.39.

Nevertheless, the pair remains on track to post weekly gains for the second straight week and for the seventh time in the last ten weeks. Assessing the currency’s performance, “GBP can again boast that it is the best performing G10 currency on a 5 day view. Since its February 14 low, cable has gained a little over 3.5% as the market has repriced expectations about the chances of a hard Brexit,” Rabobank analysts explained and added: “A cliff edge exit could still happen at the end of a short extension to the Brexit start date.  This threat should cap upside potential for the pound in the coming weeks.”

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