GBP/USD retreats below 1.2700 due to Fed Williams comments

GBP/USD falls in the mid-North American session after reaching a four-month high of 1.2793, losing 0.43%, slipping below the 1.2700 figure. At the time of writing, the major is trading at 1.2693.

A solid economic outlook in the US, could weigh on the GBP/USD in the future

The central bank bonanza ended with the Bank of England (BoE) and the Federal Reserve (Fed) holding rates unchanged but with different messages for market participants. The former struck a hawkish message as the BoE Governor Andrew Bailey said there is “still some way to go” in their inflation battle. Contrarily, Fed Chair Jerome Powell stated that monetary policy was sufficiently restrictive, and talk about rate cuts, began. That has been taken back by the New York Fed President John Williams, who said talks of March rate cuts is “premature.”

On the data front Industrial Production in the US was weaker than the 0.3% expected in November, came at 0.2%, but exceeded October’s -0.9% contraction. Later, business activity gathers momentum, revealed S&P Global in its Flash PMIs report. Even though the composite index was 51, exceeding November’s 50.7, it was boosted by the jump in the services sector, which expanded for the fourth straight month. Activity in manufacturing slipped the most in three months and remains in recessionary territory for the second month in a row.

On the UK front, business activity improved in December, except for manufacturing, which remained at recessionary territory since July 2022.

 All that said, next week’s economic docket in the UK will feature inflation figures and retail sales. Across the pond, the week will kick in with housing data and consumer confidence until Wednesday. From Thursday onwards, the final GDP print, unemployment claims, Durable Goods Orders, and consumer sentiment.

GBP/USD Price Analysis: Technical outlook

Even though the GBP/USD is on a pullback, the uptrend remains intact. As of writing, sellers are testing a six-month-old downslope support trendline at around current levels, which if broken, would exacerbate a drop towards the 1.2500 figure. In that outcome, the first support would be the 1.2600 figure, followed by the confluence of the December 13 low and the 200-day moving average (DMA) at 1.2500/02. Otherwise, if buyers holds prices above 1.2700, a test of the 1.2800 is on the cards.