GBP/USD jumps to fresh one-year high, around 1.2675 area amid post-US CPI USD sell-off

• GBP/USD gains strong positive traction on Wednesday and spikes to a fresh one-year top.
• The USD weakens following the release of the US CPI report and provides a goodish boost.
• Traders now await the key BoE decision on Thursday before placing fresh directional bets.

The GBP/USD pair catches aggressive bids during the early North American session and rallies to a fresh one-year high, around the 1.2675 region following the release of the latest US consumer inflation figures.

The US Bureau of Labor Statistics reported that inflation in the US, as measured by the Consumer Price Index (CPI) rose 0.4% in April and the yearly rate eased from 5% to 4.9% - the smallest rise since April 2021. Meanwhile, the Core CPI, which excludes volatile food and energy prices, came in at 0.4% MoM and 5.5% YoY, down from 5.6% previous and matching expectations. This further points to signs of easing inflationary pressures and reaffirms market bets for an imminent pause in the Federal Reserve's (Fed) rate-hiking cycle, which, in turn, weighs on the US Dollar (USD) and provides a goodish lift to the GBP/USD pair.

The markets, meanwhile, have also started pricing in the possibility that the US central bank will start cutting interest rates later this year. This is evident from a fresh leg down in the US Treasury bond yields, which, along with a generally positive tone around the equity markets, undermines the safe-haven Greenback. The British Pound, on the other hand, continues to draw support from rising bets for another 25 bps lift-off by the Bank of England (BoE) on Thursday. This is seen as another factor that boosts the GBP/USD pair and contributes to the strong intraday rally to its highest level since April 2022.

It, however, remains to be seen if bulls can capitalize on the move or opt to take some profits off the table ahead of the central bank even risk - the highly-anticipated BoE monetary policy meeting scheduled on Thursday. Even from a technical perspective, any subsequent move is more likely to confront some resistance near the top boundary of over a one-month-old ascending trend channel, currently pegged just ahead of the 1.2700 round-figure mark. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside and supports prospects for further gains.

Technical levels to watch