GBP/USD pares intraday losses, down a little around 1.2420 ahead of US PMIs

• GBP/USD comes under some selling pressure on Friday, albeit the fall lacks bearish conviction.
• The disappointing UK Retail Sales data, mixed UK PMIs undermine the GBP and exert pressure.
• Retreating US bond yields keeps a lid on the intraday USD uptick and lends support to the pair.

The GBP/USD pair stalls its intraday decline near the 1.2375 region and recovers over 40 pips from a three-day low touched earlier this Friday. Spot prices, however, keep the red through the early North American session and currently trade around the 1.2415-1.2420 area, still down nearly 0.20% for the day.

The British Pound weakens across the board following the disappointing UK macro releases, which, along with an intraday US Dollar (USD) uptick, exert some downward pressure on the GBP/USD pair. In fact, the UK Office for National Statistics reported that domestic Retail Sales contracted by 0.9% in March and sales excluding fuel dropped by 1% during the reported month, both missing consensus estimates. Adding to this, the flash UK Manufacturing PMI delivers a negative surprise and drops further into contraction territory, to 46.6 in April, offsetting the better-than-expected Services PMI, which rose to 54.9 in April.

The USD, on the other hand, initially drew support from growing acceptance that the Federal Reserve (Fed) will continue raising interest rates. This was seen as another factor weighing on the GBP/USD pair, though the intraday downfall stalls ahead of the 1.2350 strong horizontal support. The ongoing downfall in the US Treasury bond yields, along with a modest recovery in the global risk sentiment, act as a headwind for the safe-haven Greenback. Apart from this, rising bets for an additional interest rate hike by the Bank of England (BoE) in May contribute to limiting losses for the major, at least for the time being.

The aforementioned mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for a firm near-term direction. Market participants now look forward to the release of the flash US PMI prints. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch