GBP/USD spikes to fresh session tops, around mid-1.4100s post-US CPI

The GBP/USD pair built on its goodish intraday bounce from four-week lows and shot to fresh daily tops, around mid-1.4100s region during the early North American session.

As investors digested the latest Brexit developments, the pair witnessed a dramatic turnaround on Thursday and has now rallied around 70-80 pips from the daily swing lows near the 1.4075-70 region. The latest leg of a sudden spike over the past hour or so could be attributed to the emergence of some selling around the US dollar, despite hotter-than-expected US consumer inflation figures.

Data published by the US Bureau of Labor Statistics revealed that the headline CPI accelerated to 5% YoY in May from 4.2% previous. This was also higher than consensus estimates pointing to a reading of 4.7%. On a monthly basis, the CPI moderated to 0.6% from 0.8% in April, though was still higher than 0.4% anticipated. Adding to this, the CPI at the core level also surpassed market expectations.

The US fixed income market reacted to the stronger data and pushed the bond yields higher, though did little to impress the USD bulls. Investors seem convinced that the Fed will wait for further evidence to see if inflationary pressure is sustainable before moving to taper its bond purchases. This, in turn, continued acting as a headwind for the USD and provided a goodish lift to the GBP/USD pair.

That said, it remains to be seen if bulls are able to capitalize on the move amid speculations that the UK may delay plans to end restrictions fully on June 21 in light of the spread of the so-called Delta variant. This makes it prudent to wait for some strong follow-through buying before confirming that the GBP/USD pair has bottomed out and positioning for any further near-term appreciating move.

Technical levels to watch