GBP/USD refreshes session tops, further beyond mid-1.3800s

The GBP/USD pair continued scaling higher through the first half of the European session and shot to fresh daily tops, around the 1.3860 region in the last hour.

Having defended the 1.3800 mark, the GBP/USD pair caught some fresh bids on Wednesday and recovered a part of the previous day's losses. The British pound got a minor lift following the release of hotter-than-expected UK consumer inflation figures. In fact, the UK Office for National Statistics (ONS) reported that the headline CPI rose 2.5% YoY in June as against consensus estimates pointing to an uptick to 2.2% from the 2.1% previous.

This marked the highest level in almost three years and was accompanied by a sharper than anticipated increase in the core CPI. The gauge that excludes volatile food and energy items) jumped to a 2.3% YoY rate during the reported month from 2.0% recorded in May. This, along with a subdued US dollar demand, helped offset worries about the spread of the highly contagious Delta variant of the coronavirus and provided a goodish lift to the GBP/USD pair.

As investors looked past Tuesday's stronger US CPI print, a modest pullback in the US Treasury bond yields kept the USD bulls on the defensive. That said, expectations that the Fed could tighten its monetary policy sooner than anticipated should help limit any meaningful USD downfall. This, in turn, might keep a lid on any runaway rally for the GBP/USD pair, at least for the time being, warranting some caution for aggressive bullish traders.

Investors might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of the Fed Chair Jerome Powell's semi-annual congressional testimony on Wednesday and Thursday. Powell's remarks could influence expectations about the Fed's policy outlook, which will drive the USD and provide a fresh directional impetus to the GBP/USD pair.

Technical levels to watch