GBP/USD surges towards 1.2480s amid US inflation report, mixed UK data

• GBP/USD experiences a significant rally, climbing over 1.70% to trade around 1.2490, driven by the latest US inflation data
• October US inflation, based on an annual basis, dropped the most in the last three months to 3.2%.
• Lower than expected US CPI and core CPI numbers warrant a less hawkish approach by the US Federal Reserve.

GBP/USD rallies sharply on Tuesday after an inflation report from the United States (US) increased the chances the Federal Reserve (Fed) is done raising interest rates, while data from the UK was mixed. The major trades at around 1.2480s and climb more than 1.70%, with buyers eyeing the 1.2500 figure.

Pair approaches the key 1.2500 level as softer US CPI data leads to a sharp decline in the US Dollar

The US Bureau of Labor Statistics (BLS) informed that inflation in October cooled more than expected, with the Consumer Price Index (CPI) hitting 3.2% on a 12-month pace from 3.7%, with monthly figures cooling to 0% below the 0.1% expected by most economists. The same report revealed that core CPI, which excludes volatile items and is seen as a more stable inflation gauge, dipped a tenth and missed estimates and the prior month’s reading of 4.1% to 4%, missing estimates of 4.1%.

The data sent the Greenback on a tailspin, as the US Dollar Index (DXY) is plunging more than 1.40%, down at 104.13, after hitting a daily high of 105.73, undermined by US Treasury bond yields. The US 10-year benchmark note rate is sinking more than 18 basis points, down at 4.45%, a level last seen on September 22, 2023.

Consequently, the GBP/USD shrugged off a mixed employment report from the UK, which witnessed a slowdown in wages, while the economy added more jobs than the -198K contraction expected by analysts, with figures coming at 54K.

The GBP/USD is at the brisk of reclaiming the 1.2500 figure, despite the Bank of England{‘s (BoE) Chief Economist Huw Pill's comments, saying the BoE would need to raise rates further.

Focus shifts to Wednesday’s data, with UK’s inflation expected to dip below 5%, from September’s 6.7%. Excluding volatile items, is seen at 5.8% from 6.1%. On the US front, the agenda is expected to release the Producer Price Index (PPI), Retail Sales, the New York Fed Empire State Manufacturing Index, and Federal Reserve speakers.

GBP/USD Technical Levels