The GBP/USD exchange rate remained steady around 1.2900 as the week commenced, reflecting a sense of uncertainty in the market. Mixed economic indicators from both the UK and the US have contributed to this cautious stance. Recent attempts for the currency pair to break through the 1.3000 barrier have faltered, suggesting a possible reversal in trend.
On the UK side, the Manufacturing PMI reported a decline, reaching an 18-month low of 44.6, which indicates a contraction in manufacturing activity. Conversely, the Services PMI showed more positive performance, increasing to 53.2, marking a seven-month high. Despite this uplifting signal from the services sector, overall business sentiment remains fragile as the economic outlook for the UK continues to be uncertain.
In the US, the Manufacturing PMI also underperformed, dropping to 49.8. This figure marks the first entry into contraction territory in three months, as businesses express growing apprehension about economic conditions, partly due to evolving trade dynamics. However, the Services PMI provided a bit of relief by rising to 54.3, suggesting that service-oriented businesses are adapting more successfully to the current economic climate and can potentially manage increased costs from tariffs.
Looking ahead, the economic calendar is relatively quiet for Tuesday, with traders focused on upcoming data releases. Notably, the UK Consumer Price Index (CPI) for February is anticipated to slightly decrease from 3.0% to 2.9% year-on-year, which could impact market expectations.
In terms of price predictions, GBP/USD has managed to halt a recent two-day downturn, yet remains below the critical 1.3000 resistance level. Even though the pair trades above the 200-day Exponential Moving Average at 1.2700, the prevailing bullish momentum appears to be diminishing. Given that technical indicators have been in overbought territory for an extended period, the possibility of a significant pullback seems increasingly likely.
