The GBP/USD currency pair slipped below 1.2700 in early European trading but reversed course and advanced above the key level as the US dollar faced selling pressure post-softer core PCE inflation data. The pair’s near-term technical outlook remains uncertain, with buyers needing to reclaim 1.2700 for sustained upside momentum.

The US dollar received a boost during the American session on Thursday following upbeat GDP data, which revealed a 3.3% annual growth rate in the fourth quarter, surpassing market expectations of a 2% expansion. However, the USD’s strength faded as the day progressed, contributing to GBP/USD’s rebound.

Later in the day, the Bureau of Economic Analysis (BEA) will release the PCE Price Index for December, a key gauge of inflation for the Federal Reserve. While the GDP report showed a 2% rise in the PCE Price Index on a quarterly basis, meeting expectations, monthly figures may lack significant surprises.

The GBP/USD pair’s ability to regain traction hinges on risk perception, with US stock index futures indicating a bearish opening. A sustained decline in major equity indices could bolster the USD’s position and pose challenges for GBP/USD ahead of the weekend.

Trade Idea:

Monitor GBP/USD around the critical 1.2700 level and react to US PCE inflation data for potential entry points. Consider market sentiment for directional cues.