GBP/USD erases daily recovery gains, steadies near 1.2930

• Greenback continues to outperform its major rivals.
• GBP/USD drops more than 100 pips for the week.
• UK PM May to meet Irish PM to talk about finding  legally binding changes to the Withdrawal Agreement.

Following the fall to its lowest level in more than two weeks at 1.2853 on Thursday after the BoE in its Quarterly Inflation Report announced that it slashed the 2019 GDP growth forecast to 1.2% from 1.7% estimated in November’s publication, the GBP/USD pair staged a modest rebound but struggled to gain traction on Friday. With the greenback preserving its broad-based strength toward the end of the week, the pair is down 0.17% on the day at 1.2931, and is losing more than 100 pips for the second straight week.

Commenting on the GBP’s reaction to the BoE announcements, “Although GBP initially reacted negatively to the Bank’s new growth forecasts, in reality the currency has a bigger fish to fry in respect of Brexit related uncertainly,” Rabobank analysts said. “The pound has been trending lower this month as the date that the UK is due to leave the EU nears and the chances of a hard Brexit appear to grow.”

Earlier in the day, British Prime Minister Theresa May’s spokesperson told reporters that the PM will be having dinner with her Irish counterpart to  discuss Brussels talks and seek legally binding changes to the Withdrawal Agreement.

On Monday, the UK’s Office for National Statistics will be releasing the Q4 GDP growth figures, which is expected to tick down to 1.4% on a yearly basis from 1.5%. Investors will be looking for traces of the negative  impact of the Brexit uncertainty on the economic activity and the GBP is likely to stay vulnerable against its major rivals unless the numbers surprise to the upside.

Technical outlook by FXStreet European Chief Analyst Mario Blascak

Technically the GBP/USD is moving within a corrective trend after breaking the psychologically important 1.3000 and 38.2% Fibonacci retracement line of 1.2970 on Tuesday.

The technical oscillators like the Relative Strength Index (RSI) and Slow Stochastics (SS) are both pointing lower with Slow Stochastics making a bearish crossover in the Overbought territory indicating future price declines towards 1.2900 level representing a 100-DMA on a daily chart and 1.2800 representing 50-DMA on a daily chart next. On the upside, the 1.2970-1.3000 levels are expected to hold as a resistance line.