The pound remained practically unchanged against the USD (GBP/USD) on Wednesday after a weaker-than-expected UK manufacturing report on Tuesday ended a six-day winning streak.

However, the cross picked up some gains again overnight after Bank of England Governor Mark Carney said interest rates could rise ahead of the next General Election. He also explained hikes would be "gradual".

Despite those gains, the cross is now trapped in sideways trading, seen by some analysts as a correction after a constant climb towards the February high at 1.6822. For instance, Karen Jones, technical analyst at Commerzbank, saw a potential target at the 1.69 level, as suggested in the 240-min chart by the Elliot Wave count. She added that the weekly and monthly Elliot Wave counts suggest the move higher will end once this target is reached.

Nonetheless, the pound is currently in need of a catalyst for this scenario to happen. It may come with the biggest release of the week for the UK economy: the services PMI figure.

Joshua Mahony, research analyst at Alpari UK, highlighted the importance of this month's data following deteriorating manufacturing and construction PMI figures. "It will be crucial to gauge whether this is a countrywide phenomenon or whether the world class services sector in the UK can push forward and drive growth in the Q1," he said.

Market forecasters are looking for the services PMI to remain at a similar level as the 58.2 seen last month but, as noted by Kathy Lien, managing director at BK Asset Management, if growth has peaked, it will be difficult for the GBP/USD to hold above 1.66.

NJ

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