GBP/USD rebounds from multi-week lows, back around 1.30 mark post-UK PMI

• GBP/USD gains some respite following the release of UK Construction PMI.
• No-deal Brexit fears, stronger USD is likely to keep a lid on any runaway rally.

The GBP/USD pair reversed an early dip to six-week lows and turned neutral, around the key 1.3000 psychological mark post-UK macro data.

The British pound gained some respite from better-than-expected UK Construction PMI print for January and contributed to the pair's goodish intraday bounce of around 60 pips. However, a combination of factors – including the risk of a no-deal Brexit and a stronger US dollar – might keep a lid on any subsequent positive move.

It is worth recalling that the UK Prime Minister Boris Johnson on Monday set out tough terms for Brexit talks, while the EU chief Brexit negotiator Michel Barnier said that the EU will be very demanding for a level playing field with the UK during the negotiations. The comments resurfaced fears that Britain might crash out of the EU at the end of an 11-month transition period, which might continue to undermine the sterling.

On the other hand, the US dollar remained well supported by Monday's upbeat US ISM Manufacturing PMI and got an additional boost from the risk-on mood-led positive move in the US Treasury bond yields. This might further contribute towards capping any runaway rally for the pair, at least for the time being.

Technical levels to watch