**GBP/USD Slides Below 1.3550 as Dollar Rebounds Despite Soft US PMIs**
*By FXStreet News Team*
The GBP/USD currency pair experienced a notable drop on Thursday as growing demand for the US dollar overpowered Sterling’s brief uptick, sending the pair below the 1.3550 level even in the face of weaker-than-expected US economic data. This detailed analysis examines the reasons behind Thursday’s move, the reaction to US PMI data, the underlying technical picture, and the wider market themes influencing the British pound and the US dollar.
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### US Dollar Rebounds Despite Soft PMI Data
The US dollar rose on Thursday, reversing early losses and gaining strength against major peers, including the British pound. Market sentiment throughout the morning session was cautious as investors digested softer-than-expected US economic data.
**Key Drivers for the Dollar’s Rebound:**
– Investors re-evaluated their positions ahead of key Federal Reserve events.
– The dollar benefited from safe-haven flows amid growing concerns about global growth prospects.
– Market nerves remained heightened following recent volatility in global equity markets.
Despite the rally, incoming US PMI data signaled potential headwinds for the greenback’s prospects.
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### Mixed US PMI Releases Fail to Inspire Confidence
On Thursday, economic releases from the US painted a mixed picture of the economy, with purchasing managers’ index (PMI) data from IHS Markit registering below expectations. While PMIs are leading indicators, the softer readings introduced concerns about slowing momentum in the US private sector as the economy entered a new year.
**US PMI Highlights:**
– **US Services PMI** (January, Preliminary): 50.9, a notable slip from December’s 57.6 and below market expectations of 55.0, highlighting a significant slowdown in the US services sector, the largest contributor to US GDP.
– **US Manufacturing PMI** (January, Preliminary): Declined to 55.0 from 57.7 in December, missing the forecast of 56.8, further reflecting reduced activity in goods-producing industries.
– Both PMIs remained above the key 50.0 level, signaling continued – albeit slower – expansion.
The deceleration across services and manufacturing raised questions about the vigor of the US economic recovery in the face of ongoing supply chain disruptions and the spread of the Omicron variant. Nevertheless, investors appeared to look past the data, focusing instead on more structural themes driving the dollar.
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### Sterling Falters as Risk Sentiment Deteriorates
Sterling’s performance on Thursday highlighted the pair’s vulnerability to shifts in global risk sentiment. After reaching highs near 1.3600 earlier in the session, the pound quickly lost ground as the dollar’s rebound gathered pace, pushing GBP/USD back below 1.3550.
**Contributing Factors to Sterling’s Decline:**
– A cautious risk backdrop sapped demand for risk-sensitive currencies, including the British pound.
– Ongoing Brexit-related uncertainties, including renewed tension over the Northern Ireland Protocol and UK-EU relations, periodically weighed on the pound.
– Market participants continued to debate the pace and timing of future Bank of England (BoE) interest rate increases, with monetary policy uncertainty adding to volatility.
The weakening of GBP/USD underscores how cross-currents in risk appetite and central bank policy expectations continue to drive major currency pairs.
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### Technical Outlook: GBP/USD Drops Below Key Support
Technical analysis revealed a deterioration in the near-term outlook for GBP/USD after the pair sliced through short-term support levels. The inability to sustain gains above 1.3600 was followed by a quick move toward the 1.3550 area, now viewed as an important pivot.
**Short-Term Technical Factors:**
– The failure to hold above the 1.3600 psychological barrier invited fresh selling pressure.
– The 20-period moving average on the four-hour chart, previously offering support near 1.3570, has since turned
Read more on GBP/USD trading.