GBP/USD breaks through 50-day SMA hurdle, peaks at 1.2270 post US CPI
|Cable spikes higher, reaching 1.2270 post US CPI, despite a higher-than-expected reading.- GBP/USD gains strong traction for the second straight day and rallies to over a one-week high.
- The upbeat UK jobs report lifts bets for another BoE rate hike and underpin the British Pound.
The GBP/USD pair spikes to a peak of 1.2270 before retracing dramatically to the upper 1.21s following the much-anticipated release of US CPI data on Tuesday.
After an intial knee-jerk lower, spot prices recovered and whipsawed higher to around the 1.2270 mark, despite Core inflation reading a higher-than-expected 5.6% YoY, compared to the 5.5% forecast by economists.
The market reaction was counter-intuitive since higher inflation is expected to lead to a tighter Fed policy going forward, traditionally a positive factor for the US Dollar.
The British Pound was already on a strong footing after getting a boost in reaction to the upbeat UK labor market data, which, along with the earlier prevalent US Dollar selling bias, act as a tailwind for the GBP/USD pair.
The UK Office for National Statistics Office for National Statistics reported that the number of people claiming unemployment-related benefits unexpectedly fell by 12.9K in January.
Furthermore, Average Earnings excluding bonuses were up 6.7% during the three months to December. This marks the fastest rise since records began in 2001, excluding the pandemic period, and could add pressure on the Bank of England (BoE) to deliver another interest rate hike next month.
Apart from this, a generally positive tone around the equity markets prior to the released further undermined the safe-haven Greenback and provided an additional early lift to the GBP/USD pair.
Technical levels to watch
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