GBP/USD fades a bullish spike, drifts back closer to session lows

   •  Speculations over a possible extension of Article 50 provided a short-lived boost.
   •  Renewed USD buying interest picks up pace after stable US consumer inflation.

The GBP/USD pair faded a knee-jerk bullish spike to weekly tops and might now be headed back towards the lower end of its daily trading range post-US CPI.

With investors looking past today's softer UK inflation figures, the pair picked up the pace during the mid-European session and rallied around 85-pips from an intraday low level of 1.2874 in reaction to fresh speculations over a possible extension of the Article 50.

As Mario Blascak, FXStreet's own European Chief Analyst explains: “The UK opposition Labor party spokesman said that his party will officially back Cooper amendment. The effort from Labor party comes as the UK strives hard to avoid a disorderly Brexit. The Cooper amendment will allow the lawmakers to pass the bill requiring Prime Minister Theresa May to seek an extension to Article 50 in the event of a no-deal Brexit.”

The rumours, however, were quickly suppressed by the UK PM Theresa May's comments at the House of Commons, reiterating that government's position is that we want to leave on 29 March, which coupled with some renewed US Dollar buying kept a lid on any further up-move.

Meanwhile, the greenback got an additional boost following the release of latest US consumer inflation figures, showing that the headline CPI eased less than expected to 1.6% y/y rate and core CPI held steady at 2.2% y/y, which resulted into a strong upsurge in the US Treasury bond yields. 

Despite good two-way moves, the pair lacked any firm directional bias as investors still seemed reluctant to place any aggressive bets and preferred to wait on the sidelines ahead of the upcoming parliament debate, scheduled to take place on Thursday - February 14. 

Technical outlook

“The GBP/USD was unable to break 1.2800 representing a 50-DMA on a daily chart and retreated back above 1.2900 level. While 1.2883 representing a 100-DMA is the short-term target, the GBP/USD needs to slide towards 1.2800 to confirm the bearish trend. On the upside, 1.2970 is expected to hold as a resistance line,” Mario added further.

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