The GBP/USD currency pair faces challenges in capitalizing on its recent modest recovery, struggling to maintain momentum around the 1.2200 mark. This struggle is attributed to a steady US Dollar and a tepid risk sentiment in the market. Despite these challenges, the pair has found acceptance above the 23.6% Fibonacci retracement level from the monthly peak, hinting at potential stabilization. However, traders remain cautious, as a convincing break below the 1.2100 mark could trigger further bearish activity.
The pair's current position near the 1.2200 round figure remains precarious. Bulls are eyeing a sustained move beyond the 100-hour Exponential Moving Average (EMA), currently pegged around the 1.2240 region, as a sign of potential upward momentum. Meanwhile, the US Dollar has dropped to a fresh weekly low following a softer-than-expected US Producer Price Index (PPI) print, adding complexity to the trading environment.
On Wednesday, the GBP/USD pair attracted some sellers, influenced by dovish commentary from the European Central Bank (ECB). This selling pressure was short-lived, as the pair managed to erase earlier losses and retake the 1.2200 level in the European session. Market participants are now weighing their options, with many opting to wait on the sidelines ahead of the release of the latest US consumer inflation figures.
In recent economic data, the annual core Consumer Price Index (CPI), excluding volatile food and energy items, rose by 3.2% during the reported month. Additionally, the headline CPI climbed 2.5% year-over-year in December. On the UK front, the Office for National Statistics (ONS) reported that the core gauge remained flat during the reported month, providing little impetus for significant currency movement.
The Producer Price Index (PPI), which measures wholesale inflation, saw a modest increase of 0.2% in December. This data point further adds to the mixed signals in the market, contributing to the cautious trading sentiment observed in recent days.