GBP/USD loses its recovery momentum below 1.2700, eyes on UK Retail Sales

■GBP/USD weakens to 1.2695 on the firmer USD on Friday. 

■The US PMI accelerated to the highest level in just over two years in May. 

■The UK inflation data dashed hopes of BoE rate cuts in June. 

The GBP/USD pair loses its recovery momentum near 1.2695 during the early Asian session on Friday. The major pair edges lower after retracing from the recent top around 1.2760 amid renewed US Dollar (USD) demand. Later on Friday, the UK Retail Sales, US Durable Goods Orders, and Michigan Consumer Sentiment Index will be due. 

On Thursday, the flash US S&P Global Composite PMI climbed to 54.4 in May from 51.3 in April, above the market consensus of 51.1. This figure registered the highest level since April 2022. Meanwhile, the Manufacturing PMI rose to 50.9 in April from the previous reading of 50.0. The Services PMI improved to 54.8 in the same period from 51.3 prior. Both figures came in better than market expectations. 

A surge in prices of inputs in the manufacturing sector suggested that inflation could pick up in the months ahead, which might prompt the US Federal Reserve (Fed) to delay the interest rate cut this year. This, in turn, provides some support to the Greenback and creates a headwind for the GBP/USD pair.  

On the other hand, the UK CPI inflation report earlier this week prompted investors to lower their bets on the Bank of England (BoE) rate cut next month. Investors see nearly 50% odds of a first-rate cut in August, and a quarter-point move is not fully priced in until November.