GBP/USD preserves post-CPI gains above 1.27
The GBP/USD pair gathered some bullish momentum following the inflation report from the U.K. and rose above the 1.27 handle, erasing the majority of yesterday's losses. After refreshing its session high at 1.2740, the pair went into a consolidation phase and had been moving in a 20-pip range in the last couple of hours. As of writing, the pair is trading at 1.2729, up 0.55% on the day.
The data from the U.K. earlier today revealed that the consumer prices rose to its highest level in seven years at 2.9% (YoY) and triggered a GBP buying. A continuously rising inflation could force the Bank of England to move towards a tighter monetary policy. However, BoE members in their latest statements made it clear that the BoE could allow the inflation to overshoot in the short-term. Nevertheless, it will be interesting to see how the bank incorporates today's data in its monetary policy decision on Thursday.
- UK CPI rises further in May, its highest since April 2012
- GBP: Stabilizing after post-election markdown - BBH
Ahead of the BoE meeting, the FOMC is expected to raise the rates by 25 basis points tomorrow. Although the markets may have already priced in a rate hike, the updated FOMC economic projections could give some clues regarding a potential September rate hike. However, if the FOMC remains cautious amid the ongoing uncertainty surrounding Trump's economic agenda, the greenback could find it difficult to gather strength against its rivals.
- Fed: Market prices a 25bp rate hike - SocGen
Technical outlook
With a daily close above 1.2690 (Fib. 38.2% retracement of mid-March - mid-May rise), the pair could aim for 1.2825 (Fib. 23.6%) and 1.2875 (50-DMA). On the downside, 12635 (100-DMA) seems to have formed a strong support ahead of 1.2580 (Fib. 50%) and 1.2480 (Fib. 61.8%).
- GBP/USD negative near-term – Commerzbank