GBP/USD slips after hitting record high past 100-day SMA

• UK Retail Sales beat expectations, rising 1.7% MoM in January.
• US S&P Global Services PMI drops into contraction, dragging Composite index lower.
• Traders price in fewer BoE rate cuts, supporting further GBP/USD upside.

The GBP/USD registers losses during the North American session after testing the 100-day Simple Moving Average (SMA) at 1.2658. Good economic data from the United Kingdom pushed the pair towards year-to-date (YTD) highs of 1.2678, before stabilizing at current spot prices. The pair exchanges hands near 1.2660.

Pound stabilizes near 1.2660 after hitting YTD highs of 1.2678

S&P Global showed that business activity in the United States weakened further, even though the February manufacturing PMI rose to 51.6, up from 51.2, exceeding forecasts. Nevertheless, the services index disappointed investors, falling into recessionary territory from 52.9 to 49.7, pushing the Composite index to 50.4 from 52.7.

In the UK, Retail Sales in January exceeded estimates of 0.3%, expanding 1.7% MoM. In the twelve months to January, they dipped from 2.8% to 1%, above the forecast of a 0.6% increase. Other data showed that S&P Flash PMIs came mixed, with the manufacturing index contracting while the services sector improved from 50.8 to 51.1.

UK data showing mixed readings would make the Bank of England's (BoE) job more difficult. As the bank embarked on an easing cycle, inflation and wages rose. Consequently, further GBP/USD strength is seen after traders priced in no more than two interest rate cuts this year.

GBP/USD Price Forecast: Technical outlook

Given the backdrop, the drop in the GBP/USD could be seen as an opportunity for buyers to enter at a better price. However, a drop below 1.2600 shifts the bias slightly to the downside, as sellers would challenge 1.2549, ahead of testing the 50-day SMA at 1.2459.

Of note, the Relative Strength Index (RSI) is mixed, despite standing in bullish territory, and aims downwards. Therefore, expect a leg-down to the figure before buyers re-engage and push prices higher.