- Warmer-than-expected UK CPI figures provide a good boost to GBP / USD on Wednesday.
- A subdued demand for the USD continues to support the buying tone around the pair.
- The Fed’s optimistic expectations could help limit the USD’s slide and limit the pair’s gains.
- The market’s attention continues on Fed Chairman Jerome Powell’s testimony in Congress.
The pair GBP/USD has moved higher during the first half of the European session on Wednesday, staying close to daily highs around the 1.3850 region.
After having defended the 1.3800 level, the GBP / USD pair has captured some new purchases on Wednesday and has recovered a part of the losses of the previous day. The British pound has gotten a little boost to the upside following the release of warmer than expected UK consumer inflation figures. In fact, the UK Office for National Statistics (ONS) has reported that the General CPI rose 2.5% year-on-year in June compared to consensus estimates that point to a rebound of 2.2% and 2.1% in the previous month.
This has marked the highest level in almost three years and has been accompanied by a steeper-than-expected rise in the core CPI. The indicator that excludes volatile prices for food and energy items has risen at a year-on-year rate of 2.3% during the month reported from the 2.0% registered in May. This, coupled with a subdued demand for the US dollar, has helped offset concerns about the spread of the highly contagious Delta variant of the coronavirus and provided a good boost to the upside to the GBP / USD pair.
Investors, meanwhile, were looking past Tuesday’s stronger US CPI figure, with a modest pullback in US Treasury yields keeping USD bulls on the defensive. Having said that, Expectations that the Fed could tighten its monetary policy earlier than expected should help limit any significant decline in the dollar. This, in turn, could limit any bullish movement for the GBP / USD pair, at least for the moment, ensuring some caution for aggressive bulls.
Investors could also refrain from opening aggressive positions they prefer and wait on the sidelines. ahead of Fed Chairman Jerome Powell’s semi-annual testimony, in Congress on Wednesday and Thursday. Powell’s comments could sway expectations about the Fed’s political outlook, which will propel the USD and could generate new directional momentum for the GBP / USD pair.
GBP / USD technical levels
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