GBP/USD extends its downside below 1.2750, US data eyed

GBP/USD extends its downside around the mid-1.2700s during the early Asian trading hours on Friday. The major pair drops to multi-day lows near 1.2740 amid the rebound in the Greenback after strong US economic data. Later in the day, traders will monitor the preliminary US Michigan Consumer Sentiment for March, which is expected to remain steady at 76.9. 

Data released from the US Census Bureau on Thursday revealed that US Retail Sales jumped 0.6% MoM in February from a downwardly revised -1.1% in the previous month, below the market consensus of a 0.8% m/m rise. The Retail Sales Control Group was flat at 0% MoM from the previous reading of a 0.3% MoM decline. Additionally, the PPI figure rose 0.6% MoM in February from 0.3% MoM in January, while the Core PPI figure climbed 0.3% MoM from a 0.5% gain in January. 

The stronger US PPI data might convince the Federal Reserve (Fed) to keep interest rates at a 23-year high for longer than expected. Fed Chair Jerome Powell said that rate cuts do remain on the table, but Fed officials will need more evidence of inflation data before considering cutting the interest rate. The high-for-longer rate narrative lifts the US Dollar (USD) and acts as a headwind for GBP/USD. Investors will closely watch the FOMC policy meeting, which is anticipated to hold rates steady for the fifth consecutive meeting.

On the British Pound front, the UK GDP growth numbers expanded by 0.2% MoM in January, indicating the UK exited from a recession. The markets have pushed back expectations for a Bank of England (BoE) rate cut from June to August. BoE Governor Andrew Bailey said that central bankers turned to the question of how long they needed to keep interest rates high, given that there are some signs that restrictive policies are working to bring down inflation pressures.

Looking ahead, the US Industrial Production and the preliminary Michigan Consumer Sentiment will be released on Friday. Traders will take cues from the data ahead of the FOMC monetary policy meeting next week.