- GBP / USD gains strong continuation traction on Thursday and shoots up to a fresh multi-month high.
- Selling around the USD after the US CPI remains unabated and is seen as a key factor in the pair’s upward movement.
- Political drama in the UK could limit earnings amid mild overbought conditions and ahead of Brexit talks.
The pair GBP/USD has moved higher during the European session on Thursday and has reached the highest level since October 29, around the region of 1.3750 in the last hour.
Following a brief consolidation earlier this Thursday, GBP / USD regained positive traction and rose for the third day in a row. The momentum comes from a selling pressure around the US dollar after the release of the US CPI.
Given that markets have fully priced in a March Fed rate hike, the increase in the US CPI was seen as an opportunity to “sell the fact” and led to selling around the USD on Wednesday. Even the rally in US Treasury yields and a softer risk tone did little to support the safe-haven US dollar.
Apart from this, the current positive movement could also be attributed to the technical buying after the previous day’s sustained breakout of a downtrend line which runs from July. The bulls appeared unaffected and ignored the latest political development in the UK.
The Chances of UK Prime Minister Boris Johnson resigning are increasing amid appeals from within the Conservative Party after admitting he attended a party when gatherings were not allowed in England. This could act as a headwind for the British pound ahead of key Brexit talks on Thursday.
Even from a technical perspective, the RSI (14) on the daily chart has started to show overbought conditions short term. This further warrants some caution for aggressive bulls and before positioning for an extension of the recent upward movement witnessed since December 20.
In the absence of any major UK economic release, investors could take cues from the US economic calendar, with the PPI producer price index and weekly jobless claims. This, along with testimony from Fed Governor Lael Brainard about her nomination as vice president, will influence the USD.
Investors will take more cues from any Brexit-related news, which could contribute to generating some significant trading opportunities around the GBP / USD pair.
GBP / USD technical levels
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