GBP/USD struggles near two-day low, just above mid-1.3100s post-UK PMIs

• A broad-based USD strength dragged GBP/USD lower for the second straight day on Thursday.
• The mixed UK PMI prints failed to impress bullish traders or provide any impetus to the major.
• The market focus remains glued to fresh developments surrounding the Russia-Ukraine saga.

The GBP/USD pair maintained its offered tone through the first half of the European session and had a rather muted reaction to mixed UK PMI prints. The pair was last seen trading just above mid-1.3100s, down nearly 0.35% for the day.

The pair extended the previous day's sharp retracement slide from the vicinity of the 1.3300 mark, or over two-week high and witnessed some follow-through selling for the second straight day on Thursday. The downtick was exclusively sponsored by a stronger US dollar, which continued drawing support from the Fed's hawkish outlook.

In fact, comments by influential FOMC members, including Fed Chair Jerome Powell, have been fueling speculations that the Fed would adopt a more aggressive policy response to combat high inflation. The markets were quick to react and started pricing in the possibility of a 50 bps rate hike at the upcoming meeting in May.

This was reinforced by elevated US Treasury bond yields, which were further underpinned by concerns that surging crude oil prices could put further upward pressure on already high consumer prices. Apart from this, the lack of progress in the Russia-Ukraine peace negotiations further benefitted the safe-haven greenback.

On the other hand, the British pound was pressured by a dovish assessment of the Bank of England policy decision last week and its view around the need for future rate hikes. Bulls failed to gain any respite from an unexpected rise in the UK Services PMI, which was offset by a larger drop in the gauge for the manufacturing sector.

Market participants now look forward to the US economic docket, featuring the release of the flash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims. The focus, however, will remain on geopolitics amid expectations that US President Joe Biden will announce new sanctions targeting Russian politicians.

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