Important events today:

09:30 UTC – GBP – PMI Composite Index

14:45 UTC – USD – PMI Composite Index

The GBP to USD pair is recovering its recent losses during early Asian trading on Wednesday. Investors are awaiting the release of the January UK Manufacturing and Services PMIs to provide fresh impetus.

Investors are betting that the Bank of England (BoE) will start cutting rates as early as May, and three more cuts over the course of 2024 would bring them to 4.25% from 5.25% now. However, no change in monetary policy is expected at the Bank of England’s February meeting. Market players will be focused on the data released on Wednesday. S&P Global’s preliminary UK Services Business Activity Index will drop from 51.4 in December to 51.0 in January, while the Manufacturing Business Activity Index will remain unchanged at 47.9.

According to the Richmond Fed’s manufacturing survey, the composite index of business activity in the manufacturing sector for January fell to -15 from -11 in December, worse than market expectations of -7. Among the three components of the index, shipments rose from -17 to -15, new orders fell from -14 to -16, and employment fell significantly from -1 to -15.

During the Asian session on Wednesday, the pound is trading at 1.2700. The psychological level of 1.2700 acts as immediate resistance, followed by the weekly high of 1.2747, combined with the major barrier of 1.2750. A break above the major barrier could see GBP/USD move back to the monthly high of 1.2785 and then to the psychological level of 1.2800.

Recommendations: Trade with Buy orders up to the current price level