GBP/USD climbs above 1.2970 as USD selloff intensifies after PMI data

• Economic activity in US private sector contracts in February.
• US Dollar Index erases majority of weekly gains.
• Upbeat Manufacturing PMI from UK helps GBP gather strength.

The GBP/USD pair extended its daily recovery during the American session on Friday and touched a fresh daily high of 1.2978 as the USD came under heavy selling pressure on disappointing PMI data. As of writing, the pair was up 0.7% on the day at 1.2972. Despite this rebound, the pair remains on track to post weekly losses. 

PMI data impact FX market on Friday

Earlier in the day, the IHS Markit reported that the Manufacturing PMI in the UK rose to 51.9 in February (preliminary) from 50 in January to show an expansion in the sector's business activity at a modest pace. The GBP capitalized on the data and started to gather strength against its major rivals.

In the second half of the day, the IHS Markit's PMI report for the US revealed that the economic activity in the private sector in February contracted with the Composite PMI slumping to its lowest reading in 76 months at 49.6 following January's reading of 53.3. Moreover, the Manufacturing PMI and the Services PMI in the US fell to 50.8 and 49.4, respectively.

Pressured by the disappointing data, the US Dollar Index erased a large portion of its weekly gains in a quick fashion and was last seen down 0.57% on the day at 99.32.

Assessing the data,  "the deterioration in was in part linked to the coronavirus outbreak," said Chris Williamson, Chief Business Economist at IHS Markit. "However, companies also reported increased caution in respect to spending due to worries about a wider economic slowdown and uncertainty ahead of the presidential election later this year. 

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