Currently, GBP/USD is trading at 1.3291, up 0.97% on the day, having posted a daily high at 1.3300 and low at 1.3161.
GBP/USD is meeting territory last seen back in September 2016, around the time when PM May was appointed and placed sooner than the market had been expecting, but Sterling is still some way off from those recovery highs at 1.3445.
However, the inflation data overnight was making for an interesting BoE this week with a focus on whether MPC voting member and hawk Haldane will now back his June 21st hawkish signal and join the other two hawks, Saunders and McCafferty, to make this week's vote 6-3 instead of the 7-2 vote prior vote.
UK: Rate risks highlighted by inflation data - ING
In this respect, the UK prices continued to overshoot the BoE's 2% target today for the month of August. CPI increased by 2.9% yr/yr, higher than 2.6% in July and beating expectations of 2.8%. However, this could be down the depreciation of sterling since the June 2016 referendum. Still, analysts at Brown Brothers Harriman, for instance, suggested that there is a good reason to expect the peak in inflation in the coming months.
Eyes now turn to the UK labor market this week that the same analysts at BBH explained continue to absorb slack: "The risks to the unemployment rate is on the downside, even though it has already fallen to 4.4% from 4.8% at the end of last year. However, earnings growth is slipping further behind the inflation, and this is likely to squeeze discretionary consumption over time," they explained.
Wage growth expectations are also key this week, expected at 2.3% vs 2.1%. Other than BoE's Thursday meeting, there is a large 1.3200 option expiry on Friday in GBP1.69b.
GBP/USD levels
Valeria Bednarik, chief analyst at FXStreet explained that technically, the pair remains biased higher short term, given that in the 4 hours chart the price met buying interest around a sharply bullish 20 SMA, whilst technical indicators are currently aiming to regain the upside after correcting early overbought conditions.
"An extension beyond the daily high should expose the 1.3347 level, September 2016 high, while steady gains beyond this last should lead to a sustained rally up to 1.3500."
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