The GBP/USD pair is experiencing modest gains, trading just under 1.2400 during early trading on Friday. After a slight increase on Thursday, market attention is now turning towards the preliminary Purchasing Managers’ Index (PMI) reports from both the UK and the US, as these economic indicators could significantly influence currency movement as the weekend approaches. Current technical analysis suggests that buyers are maintaining a bullish sentiment in the short term.
The positive trend for GBP/USD is partly linked to a shift in market sentiment observed during Asian trading hours, leading to a weakening of the US Dollar against its counterparts. Additionally, recent comments from US political figures have alleviated some concerns regarding potential tariffs on China, thereby easing fears of aggressive inflationary pressures that typically strengthen the dollar.
For the UK, the S&P Global/CIPS Composite PMI is anticipated to decline slightly to 50 from December’s reading of 50.4. Should the figure dip below the threshold of 50, indicating a contraction in the economic activities of the private sector, the Pound could face downward pressure, potentially triggering a decrease in the GBP/USD exchange rate.
Later in the day, focus will shift to the US PMI figures, with the S&P Global Manufacturing PMI expected to show a slight improvement to 49.6 from 49.4 in the previous month. Should this figure rise above 50, it may reinforce the strength of the US dollar, complicating the ability of GBP/USD to maintain its position.
Attention will also be given to market risk sentiment as the weekend approaches. With U.S. stock index futures showing slight declines, any rebound in primary indexes after the market opens could hinder the dollar’s strength relative to its rivals.
Technical indicators suggest that the Relative Strength Index (RSI) is maintaining a bullish outlook above 60. Key resistance levels are identified at the Fibonacci 50% retracement level and the 200-period Simple Moving Average, around 1.2450 – 1.2460. A breakthrough here could push prices toward the next resistance at 1.2500. Conversely, immediate support is found at 1.2370, with further levels at 1.2310 and 1.2260.
