GBP/USD bounces off low, turns neutral around 1.2575 level post-UK CPI
- GBP/USD extended the previous day’s sharp intraday pullback from 200-DMA.
- The latest Brexit optimism continued lending some support to the British pound.
- Wednesday’s mostly in line UK inflation figures failed to provide any fresh impetus.
- The key focus will remain on the latest BoE monetary policy update on Thursday.
The GBP/USD pair remained on the defensive post-UK inflation report, albeit has managed to rebound around 20-25 pips from the Asian session lows.
The pair witnessed some follow-through selling for the second straight session on Wednesday and extended the previous day's rejection slide from the very important 200-day SMA – levels just ahead of the 1.2700 mark. The pullback was sponsored by resurgent US dollar demand amid fears over a second wave of coronavirus infections and escalating geopolitical tensions.
On the other hand, the British pound failed to capitalize on its move up led by easing concerns about a no-deal Brexit, especially after the UK and the European Union agreed to intensify post-Brexit talks. The UK Prime Minister Boris Johnson added to the latest optimism and said that an outline of a deal could be reached by the end of July.
The GBP/USD pair had a rather muted reaction to the latest UK consumer inflation figures for May. In fact, the headline CPI came in line with expectations and remained flat during the reported month. Meanwhile, the yearly rate eased to 0.5% from 0.8%, matching consensus estimates, and seemed to be the only factor lending some support to the major.
However, the upside is likely to remain limited as investors might refrain from placing any aggressive bets ahead of the latest monetary policy update by the Bank of England (BoE) on Thursday. The BoE is expected to keep the benchmark rate unchanged at 0.1% but increase the size of its quantitative easing programme by at least £100bn.
Technical levels to watch