GBP/USD Forecast: Pound recovers modestly, 1.3100 still under threat

GBP/USD has staged a recovery after dipping below 1.3100 on Thursday but has lost its momentum early Friday. The negative shift witnessed in risk mood could continue to weigh on the pair ahead of the weekend and drag it toward 1.3100 support.

On Thursday, the Bank of England (BOE) announced that it hiked its policy rate by 25 basis points to 0.75% as expected. Deputy Governor Jon Cunliffe, however, voted to keep rates on hold and didn't allow the British pound to capitalize on the rate increase. Additionally, the policy statement showed that the Russia-Ukraine crisis had "increased the uncertainty around the economic outlook significantly" and the bank's cautious tone further weighed on the GBP. 

During the American trading hours, the upbeat market mood, as reflected by the strong gains seen in Wall Street's main indexes, made it difficult for the dollar to find demand and opened the door for a GBP/USD rebound.

With the US Federal Reserve's and the BOE's policy meetings out of the way, investors shifted their focus back to the Russia-Ukraine conflict on the last trading day of the week.

A Ukrainian presidential aide said on Friday that talks with Russia was progressing slowly and reiterated that they will not negotiate an inch of the Ukrainian territory. On a concerning note, US Secretary of State Antony Blinken claimed that Russia might be contemplating a chemical-weapon attack.

Market participants could seek refuge toward the end of the day on heightened risks of a further escalation of the conflict on the weekend. In that case, the dollar could continue to gather strength and cause GBP/USD to edge lower.

GBP/USD Technical Analysis

GBP/USD was last seen trading below 1.3150 (Fibonacci 38.2% retracement of the latest downtrend). If this level turns into resistance, the next bearish targets are located at 1.3100 (Fibonacci 23.6% retracement, 50-period SMA on the four-hour chart) and 1.3050 (static level).

On the flip side, the pair could rise toward 1.3200 (psychological level, Fibonacci 50% retracement) if it manages to reclaim 1.3150 on the back of risk flows.

Meanwhile, the Relative Strength Index (RSI) indicator is edging lower toward 50, confirming the loss of bullish momentum.