GBP/USD remained stable around 1.2900 as the week began, with mixed PMI figures from the UK and the US contributing to market uncertainty. The UK Manufacturing PMI fell to 44.6, an 18-month low, while the Services PMI rose to 53.2, indicating a divided outlook.
In the US, the Manufacturing PMI dropped to 49.8, entering contraction territory. The Services PMI improved, reaching 54.3, suggesting that services may cope better with rising tariff costs.
Focus On UK CPI Inflation Report
Traders are focused on the upcoming UK CPI inflation report, expected to decrease slightly to 2.9% from 3.0% year-on-year. GBP/USD remains above the 200-day EMA at 1.2700 but shows signs of potential decline as upward momentum fades.
The stability around 1.2900 suggests a market waiting for fresh data, with traders reacting to economic reports rather than strong directional moves. The differing trends in UK business activity highlight an imbalance—manufacturing struggling at an 18-month low while services remain resilient. This contrast could lead to uneven growth, complicating expectations about future central bank decisions.
In the US, manufacturing slipping below 50 confirms a contraction, raising concerns about economic slowdown. However, a stronger services sector points to ongoing domestic demand, potentially mitigating broader weakness. If inflationary pressures persist, policymakers may avoid aggressive policy shifts, keeping market participants alert for any change in rhetoric.
Key Technical Levels To Watch
All eyes will now be on the UK’s inflation report, with expectations of a marginal decline to 2.9%. A lower figure could reinforce arguments for a more accommodative stance from monetary authorities, weakening the pound. On the other hand, if inflation remains stickier than forecast, policy tightening may stay on the table, offering potential support to sterling.
From a technical perspective, GBP/USD holding above the 200-day EMA around 1.2700 creates a key level to monitor. Upside momentum appears to be running out of steam, increasing the possibility of a move lower. If downward pressure builds, testing support zones could be a natural next step. Meanwhile, if fresh data offers renewed optimism, resistance near recent highs may see increased selling interest.
