- The GBP/USD has staged a rapid turnaround rising to a new weekly high.
- The primary driver is a weaker dollar, a significant shift after the initial response to the inflation report.
The GBP/USD is up some 50 pips on the day after trading lower beforehand. The pair reached a high of 1.3972, staging a quick recovery after falling earlier to 1.3800.
The US dollar initially rallied as the US inflation report came out above expectations. Core CPI beat projections by rising by 1.8% y/y against 1.7% that was expected. Other inflation data came also came out above estimates. The specter of a faster pace of rate rises sent the US dollar higher against most currencies. This fear also weighed on stocks.
However, when shares trading began on Wall Street, the drops were not very significant. Stocks turned around and are now trading higher. The VIX volatility index also slipped, indicator calmer trade. The better atmosphere resulted in a sell-off of the US dollar.
GBP/USD Technical picture
The GBP/USD is now trading at the highest levels of the week. The 1.3980 seen when the pair last traded at these levels caps the pair ahead of the round 1.40 level. Further above, 1.4060 was the peak after the BOE.
Looking down, 1.3920 was a double-top earlier in the week and now switches to support. 1.3845 provided limited support and is a notable line. The round number of 1.38 was the low of the day.
The RSI on the 30-minute chart is positive but nears overbought levels. On the other hand, momentum is still robust.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.