The British pound strengthened on Wednesday after UK consumer price inflation surged to 10.1% in July, its highest since February 1982, up from an annual rate of 9.4% in June raising expectations that the BoE will raise interest rates by another 50 bps next month. Markets are pricing in an 85% chance of a half-point rate hike at the central bank's September meeting. Policymakers expect that inflation will peak at 13.3% in October and the UK could face recession in Q4. On the other hand there were hints in the data that future inflation pressure might be starting to abate. The latest jobs report already showed signs that the labour market is starting to cool, while prices paid by factories started to decline slightly, which can make BoE more restrained when it comes to interest rate hikes. From technical point of view, GBPUSD pair bounced of the resistance zone around 1.2160 which coincides with 61.8% Fibonacci retracement of the last downward wave and earlier broken lower limit of the ascending channel. Nevertheless as long as the pair sits above key support at 1.20 further upward impulse may be launched.
GBPUSD, H4 interval. Source: xStation5
