GBP/USD struggles to defend 1.3200 with eyes on UK PMIs, Ukraine-linked risk catalysts

• GBP/USD remains sidelined after reversing from three-week high.
• Market’s anxiety ahead of key data/events test pair traders even as yields retreat, stock futures print mild gains.
• UK inflation rallied but Sunak failed to impress with Spring Budget the previous day.
• Biden’s meeting with NATO friends, US data also highlight Thursday.

GBP/USD licks its wounds around 1.3200 during a quiet Asian session on Thursday, following the U-turn from a three-week high.

In addition to a lack of major data/events in Asia and light macro, the market’s anxiety ahead of the key catalysts scheduled for publishing during the European and the US session recently restricts the cable pair’s moves.

Among them, preliminary readings of the UK and the US PMIs for March and US President Joe Biden’s meeting with European counterparts from the North Atlantic Treaty Organization (NATO) will be the key. Also important will be the US Durable Goods Orders for February.

Ahead of the events, risk catalysts flash mostly negative signals as the UK and the US braces for more help to Ukraine while Russia hands over a list of diplomats termed as ‘persona non grata’ to the US embassy. Also, US Senator John Cornyn recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome ahead of Biden’s meeting with NATO friends. To counter the same, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.”

On the other hand, UK Manufacturing PMI is expected to ease to 56 from 58.2 prior whereas the Services PMI may drop to 54.2 from 55.5. Further, the US Markit Manufacturing PMI may also weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Additionally, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

Read: Durable Goods Orders Preview: Upside surprise set to trigger next leg up in the dollar

It should be noted that a fresh 30-year high of the UK Consumer Price Index (CPI) for February, 6.2% YoY versus 5.9% expected and 5.52% prior, failed to underpin the GBP/USD buying the previous day. The reason could be linked to UK Chancellor Rishi Sunak’s failure to impress traders with a downward revision to the growth forecast in the Spring Budget.

That said, the US Dollar Index (DXY) fades the previous day’s recovery moves even as the US Treasury yields retreat from a three-year high. It’s worth noting that the US 10-year Treasury yields rose to the highest level since May 2019 before reversing from 2.417%, down 1.5 basis points (bps) near 2.30% at the latest. Though, the weakness in the yields could be witnessed in mild gains of the S&P 500 Futures.

Moving on, GBP/USD is likely to witness a volatile day and needs caution in trading.

Technical analysis

The weekly support line defends GBP/USD buyers around 1.3170 but recovery remains elusive until crossing January’s low near 1.3360.