GBP/USD: Sterling edges lower amid thin trading

The pound pared back some gains against the US dollar on Monday, with cable pulling back toward $1.2612 in mid-morning deals.

The modest reversal comes despite broad dollar weakness, as holiday-thinned volumes and position adjusting ahead of key economic data midweek keeps the GBP/USD pair somewhat rangebound.

Sterling had pushed higher early Monday from last week’s close, with cable reaching session highs around $1.2630 before retreating. If the pound can hold above this level, further near-term recovery is likely.

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Friday’s stronger-than-expected US producer inflation figures had initially boosted the dollar, though the greenback struggled to maintain gains as the session wore on. With US markets closed Monday for Presidents’ Day, thin trading conditions could limit directional bias for cable during New York trade.

Investor focus shifts to Thursday’s flash February services PMI data out of both countries, which will be closely watched for signs of economic trajectory on either side of the Atlantic.