- GBP / USD saw a solid intraday bounce from multi-week lows amid renewed USD sell bias.
- The US CPI report failed to impress the USD bulls or stop the strong bullish move.
- COVID-19 nervousness could limit any significant hike amid lingering Brexit-related uncertainties.
The pair GBP/USD It built on its strong intraday rebound from the four-week lows and spiked to fresh daily highs, around the 1.4150 area during the early days of the American session.
As investors took in the latest Brexit developments, the pair witnessed a dramatic turnaround on Thursday and has now recovered around 70-80 pips from daily lows near the 1.4075-70 region. The latest leg of a sudden rally over the last hour or so could be attributed to the surge in some selling around the US dollar, despite higher than expected US consumer inflation figures.
Data released by the US Bureau of Labor Statistics revealed that the headline CPI accelerated to 5% year-on-year in May from 4.2% previously. This also beat consensus estimates that point to a 4.7% reading. On a monthly basis, the CPI moderated to 0.6% from 0.8% in April, although it was still higher than the 0.4% forecast. Added to this, the underlying CPI also exceeded market expectations.
The US bond market reacted to the stronger data and pushed bond yields higher, although it did little to impress USD bulls. Investors appear to be convinced that the Fed will wait for more tests to see if inflationary pressure is sustainable before acting to reduce its bond purchases. This, in turn, continued to act as a headwind for the USD and provided a good boost to the GBP / USD pair.
That said, it remains to be seen whether the bulls can capitalize on the move amid speculation that the UK may delay plans to end the restrictions entirely on June 21 in light of the spread of the so-called Delta variant. This makes it prudent to wait for some solid follow-up buying before confirming that GBP / USD has bottomed out and positioned for any further short-term appreciation moves.
Technical levels
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