GBP/USD opens with a large gap, eyes on US CPI

• GBP/USD pops higher in the open ahead of a key week for the greenback. 
• The US CPI will be a key event for the pair. 

After rallying to a high of 1.1648 on Friday, GBP/USD has gapped from a close of 1.1585 to 1.1640 so far as the US dollar comes under pressure from the off. 

The greenback fell away from a near 20-year high recently and dropped as low as 108.35 and was last down 0.6% at 108.93 as measured by the DXY index. Nevertheless, US rate futures are pricing in an 87% chance of the Fed hiking by 75 bps hike this month. The fresh US Consumer Price data this week is likely to be closely watched which could determine the size of the Federal Reserve's rate hike at this month's policy meeting.

''Core prices likely stayed firm in August, with the series registering another 0.3% MoM gain. Shelter inflation likely maintained strong momentum, though we look for used vehicle prices to retreat again. Importantly, gas prices likely brought additional notable relief for the headline series, declining a sharp 11% MoM. Our MoM forecasts imply 8.0%/6.0% YoY for total/core prices,'' analysts at TD Securities explained. 

Meanwhile, after a modest dip the previous day following the death of Queen Elizabeth, the pound is firm on the sentiment over a hawkish Bank of England. The central bank said on Friday that it would delay its next monetary policy meeting by one week due to the period of royal mourning. 

''We expect this to move the Bank of England from a state of front-loaded 75 bps rate rises to one in which we will see a more gradual but also a more sustained path of rate increases,'' analysts at Rabobank said. 

''We still favour a 50 bps increase in Bank rate to 2.25% next week; a 50 bps hike in November looks now likely too. The risks remain skewed to the upside.''