GBP/USD Rebounds to 1.2950 as US Dollar Weakens Amid Risk Shift

The British pound showed signs of recovery on Friday, climbing back toward 1.2950 against the US dollar after briefly dipping below 1.2920. However, lackluster macroeconomic data from the UK has clouded the near-term outlook, making sustained gains uncertain.

The UK’s Office for National Statistics (ONS) reported a 0.1% contraction in Gross Domestic Product (GDP) for January, falling short of market expectations for a 0.1% expansion. This decline follows a 0.4% growth rate in December, signaling potential economic slowdown. Additionally, Industrial Production and Manufacturing Production figures dropped by 0.9% and 1.1% month-over-month, both underperforming analyst estimates.

Despite the weaker UK data, the pound found some footing as broader market sentiment shifted in favor of risk assets, leading to a decline in demand for the US dollar.

Technical Outlook: Key Support and Resistance Levels

From a technical perspective, GBP/USD remains within a tight range, struggling to break above key resistance levels.

• The last 4-hour candle closed below the 20-period Simple Moving Average (SMA), indicating continued hesitation among buyers.
• The Relative Strength Index (RSI) fell back to 50, suggesting neutral momentum.
• Key support levels to watch:
  • 1.2900: Mid-point of the ascending regression channel and psychological level.
  • 1.2850: Static support level.
  • 1.2800: The 200-day SMA, a major technical floor.
• Resistance levels include:
  • 1.2970: A near-term static resistance.
  • 1.3000: A round number psychological barrier.
  • 1.3040: The upper limit of the ascending channel.

Although bearish momentum has yet to build, the pair faces hurdles in mounting a meaningful recovery amid weak domestic economic performance.

US Economic Data in Focus

The US dollar’s weakness on Friday stemmed largely from improving risk sentiment, which saw investors move away from the safe-haven currency. US stock index futures rose between 0.5% and 1% in early European trading, further pressuring the greenback.

Later in the day, traders will turn their attention to the University of Michigan’s preliminary Consumer Sentiment Index for March. A notable decline in consumer confidence could further weigh on the US dollar, potentially offering GBP/USD additional upside momentum.

For now, the pound’s recovery remains fragile, with traders balancing weak UK fundamentals against a softer US dollar. Market participants will closely monitor both technical indicators and macroeconomic developments to determine the pair’s next direction.