GBP/USD refreshes weekly high, around 1.2470 amid softer US CPI-inspired USD sell-off

• GBP/USD turns positive for the second straight day amid broad-based USD selling.
• The softer US CPI lifts bets for an eventual dovish Fed shift and weighs on the buck.
• The risk-on impulse also dents the USD’s safe-haven status and remains supportive.

The GBP/USD pair reverses an intraday dip to sub-1.2400 levels on Wednesday and turns positive for the second straight day in reaction to softer-than-expected US consumer inflation figures. The momentum pushes spot prices to a fresh weekly top, around the 1.2465-1.2470 region during the early North American session.

The US Bureau of Labor Statistics reported that the headline CPI rose by 0.1% in March as compared to the 0.4% recorded in the previous month and the 0.3% anticipated. Furthermore, the yearly rate decelerated from 6% in February to 5.0% during the reported month and largely overshadows the mostly inline core CPI, which excludes food and energy prices. Nevertheless, the data reinforces expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle. This, in turn, drags the US Dollar (USD) back closer to a two-month low touched last week and lends support to the GBP/USD pair.

Apart from this, the risk-on impulse - as depicted by a strong rally in the US equity futures - is seen as another factor denting the Greenback's relative safe-haven status. That said, bets for another 25 bps lift-off at the next FOMC policy meeting in May puts a floor under the US Treasury bond yields, at least for the time being. This could lend some support to the buck, which, along with the recent mixed signals from the Bank of England (BoE) policymakers over future rate hikes, might cap gains for the GBP/USD pair. Hence, it will be prudent to wait for some follow-through buying before placing fresh bullish bets.

Investors also seem reluctant and might prefer to wait on the sidelines ahead of the release of the FOMC meeting minutes, due later during the US session. The Fed minutes will provide insight into how policymakers evaluated the need for higher rates despite the turmoil in the banking sector. This should help investors to determine the near-term trajectory for the USD and provide a fresh directional impetus to the GBP/USD pair.

Technical levels to watch