GBP/USD on track to close the day with small losses above 1.31

• Greenback gathers strength in the second half of the day.
• US Dollar Index recovers a small part of yesterday's fall.
• UK PM May spokesman says the government is determined to leave the EU on March 29.

After closing the first two days of the week lower, the GBP/USD pair took advantage of the broad-based USD weakness and staged a modest rebound on Wednesday. Although the pair continued to push higher earlier in the day on Thursday, it failed to cling to its gains and now looks to close the day in the red near 1.3110.

Following the heavy sell-off that was triggered by the FOMC's dovish shift in its monetary policy statement and Chairman Powell's cautious remarks regarding the economic outlook, the greenback gained traction in the NA session. The report published by the U.S. Census Bureau on Thursday showed that new home sales increased by 16.9% on a monthly basis in November to provide an additional boost to the currency. However, with no other fundamental drivers supporting the buck's advance on Thursday, the US Dollar Index lost its momentum in the late NA session and was lat up 0.2% on the day at 95.60.

On Brexit-related headlines, British Prime Minister Theresa May's spokesman reiterated that the government was determined to leave the EU on March 29. "Cancelling Parliament's February recess shows that the government remains determined," the spokesman added. Nonetheless, with EU officials rejecting the possibility of the renegotiation of the withdrawal agreement every chance they get, the backstop is unlikely to be resolved anytime soon, which could continue to cap the GBP's gains.

On Friday, the IHS Markit will release its UK Manufacturing PMI report. Later in the day, markets will be paying close attention to the NFP report from the U.S. Previewing the data, "We expect some of last month's unexpected gains in employment to be given back in January. In particular, we see scope for softness in the manufacturing sector after three consecutive months of solid payroll gains and as supported by the regional Fed surveys, which point to some weakness in manufacturing employment," said TD Securities analysts in a recently published report.

Technical outlook by FXStreet Chief Analyst Valeria Bednarik

The pair has spent most of the day hovering around the current levels, now offering a neutral-to-bearish stance in its 4 hours chart, as the price is unable to gain ground beyond a mild-bearish 20 SMA, while technical indicators hold directionless within negative ground. The pair bottomed twice this week around 1.3055, the level to break to trigger further slides which can extend down to the 1.2970 price zone. Brexit uncertainty will likely keep the upside limited, with advances toward the 1.3200 level seen by market players as selling opportunities.

Support levels: 1.3050 1.3010 1.2970

Resistance levels: 1.3150 1.3195 1.3230