- GBP/USD came under some selling pressure on Friday and eroded a part of the overnight gains.
- The GBP was weighed down by indications of a prolonged lockdown and dismal UK macro data.
- A pullback in the equity markets benefitted the safe-haven USD and contributed to the downfall.
The GBP/USD pair added to its intraday losses and refreshed daily lows, around mid-1.3600s in reaction to disappointing UK PMIs.
The pair witnessed some heavy selling on Friday – snapping three consecutive days of the winning streak – and eroded a major part of the overnight gains to the highest level since May 2018. The British pound was weighed down by indications of an extended lockdown in Britain, which means a further slowdown in the economic activity.
The sterling lost some additional ground following the release of downbeat UK Retail Sales figures, which recorded a modest rise of 0.4% in December. Adding to this, the UK PMI prints missed market expectations by a big margin, which further added to worries about the UK economic growth at the start of 2021 and exerted additional pressure on the GBP.
In fact, the flash version of the UK Manufacturing PMI dropped to 52.9 in January as against consensus estimates pointing to a fall to 54 from 57.5 previous. Meanwhile, the gauge for the services sector plunged further into the contraction territory and came in at 38.8 for the reported month, worse than 45 anticipated and 49.4 recorded in December.
Apart from this, a pullback in the equity markets provided a modest lift to the safe-haven US dollar. This was seen as another factor that contributed to the offered tone surrounding the GBP/USD pair and the intraday decline. It, however, remains to be seen if pair can attract some dip-buying or the pullback marks a near-term top, setting the stage for further weakness.
Technical levels to watch
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