• Pound rally has stalled right below 1.2800.
• Upbeat UK services activity data has provided a fresh boost to the pair.
• GBP/USD is unlikely to rally much further – Nomura.

The Sterling bounced higher following the release of the UK S&P Global/CIPS PMI figures on Friday although it remains unable to find a meaningful acceptance in the 1.2800 area.

Data released earlier today showed a strong improvement in services activity in December. The 52.7 flash PMI beat expectations of a 51.0 reading an marks the best performance of the last five months.

On the other hand, manufacturing activity revealed a deeper contraction, retreating to 46.4 from 47.2 in November, against the market consensus of a 47.5 reading.

GBP/USD further appreciation will be modest – Nomura

Looking forward, the Technical Analysis team at Nomura Bank are sceptical about the pair’s upside scope: “We do not expect economic growth in the UK for the next few quarters to be as resilient as in the US, and as a result, sluggish growth in the UK is likely to be a drag on GBP. Therefore, on net, we think the rise in GBP/USD will be modest, and expect 1.27 and 1.28 in Q1 and Q2 2024, respectively.”
 

Technical levels to watch