GBP/USD off highs but consolidating recent gains around 1.2550

The GBP/USD pair is up for the second day in-a-row, but the bullish momentum eased over the last hours, following US CPI data. It peaked at 1.2570, highest level since last Friday and then pulled back, finding support at 1.2525 (20-hour moving average). During the last hour, it rebounded, and it was trading at 1.2550/55, up 55 pips for the day and more than a hundred pips above yesterday’s low. 

The pair holds to most of the recent gains supported by the weakness around the US Dollar, triggered by the Fed Chair Powell's remarks yesterday that were seen as dovish. Today’s CPI data came in above expectations but did not alter significantly Fed rate cut expectations. “Today’s report is consistent with inflation climbing back toward the FOMC’s target in the coming months. But Fed officials are increasingly concerned about the generalized weakness in inflation that has persisted this expansion”, wrote Wells Fargo analysts, that expected a 25 bps cut at the July meeting. 

Also Cable is being supported by a stronger Pound across the board. It is up versus the euro and also against the Swiss Franc despite warnings from Bank of England Governor Carney. Today he spoke following the release of the Financial Stability Report. They see the UK financial system ready for any kind of Brexit, but Carney warned that a no-deal outcome would have immediate disruptive consequences on the economy. On the political front, the Conservative leadership contest continues, with no significant news. 

From a technical perspective, GBP/USD holds a bullish tone that will likely remain intact in the short-term as long as it stays on top of the 20-hours moving average now at 1.2528. Support levels below are seen at 1.2510 and 1.2495 (daily low). On the upside, 1.2560 is a critical resistance, and a consolidation on top should clear the way to further gains. The next strong resistance is 1.2585/90 (July 4/5 high). 

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