GBP/USD Corrects Further From Multi-Week High, Drops Closer To 1.2200 On Weaker UK Pmis

The GBP/USD pair comes under heavy selling pressure on the last day of the week and retreats further from its highest level since early February, around the 1.2340-1.2345 region touched on Thursday. The selling bias remains unabated through the first half of the European session, dragging spot prices back closer to the 1.2200 mark in the last hour.

A fresh wave of the global risk-aversion trade – as depicted by a sharp intraday fall in the equity markets – assists the US Dollar (USD) in gaining strong follow-through traction on Friday and building on the previous day’s goodish rebound from a seven-week low. This, in turn, is seen as a key factor weighing heavily on the GBP/USD pair. The British Pound is further weighed down by the Bank of England Governor Andrew Bailey’s dovish remarks and the disappointing release of the flash UK PMI prints for March.

In an interview with BBC on Friday, Bailey noted evidence of encouraging progress on inflation and that companies should bear in mind that BoE forecasts inflation will fall. Furthermore, the S&P Global/CIPS UK Manufacturing PMI contracted further to 48.0 in March versus the 49.8 expected and the previous month’s final reading of 49.3. The Preliminary UK Services Business Activity Index for March dropped to 52.8 from 53.5 in February, and consensus estimates for a reading of 53.0.

With the latest leg down, the GBP/USD pair has now reversed most of its gains recorded over the past two sessions and moved within striking distance of the weekly low. Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and the flash PMI prints for March. This and the broader risk sentiment will influence the USD price dynamics and allow traders to grab short-term opportunities around the major.

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