GBP/USD recovered, with little hope to stage a sustainable rise.

The British Pound fought back from below 1.20/USD and the 200-DMA (1.1938) on Friday but conviction for a return to 1.2450 is low based on the outlook for a widening in US/UK rate differentials. Based on implied market rates, the Fed/BoE spread could widen to almost 100 bps in 2Q, keeping GBP/USD in check. At the time of writing, the pair is trading at 1.2032 versus the previous closing at 1.20392.

The PMI reading for February is the pick of the UK data calendar tomorrow. We forecast a modest improvement to 49.2. This may not be enough to lift GBP/USD with investors instead bracing for the FOMC minutes and US PCE inflation.

The Sterling has underperformed a solid majority of its most directly comparable peers but despite this GBP/CAD has appeared to dig its heels in when near the round number of 1.61, which coincides closely with a Fibonacci support level and a 100-day moving average. The pair is trading at 1.6184 at the time of writing versus the previous closing at 1.62135.