GBP/USD jumps closer to mid-1.3700s, highest since October 29 amid sustained USD selling

• GBP/USD gained strong follow-through traction on Thursday and shot to a fresh multi-month high.
• The post-US CPI USD selling remained unabated and was seen as a key factor fueling the momentum.
• The UK political drama might cap gains amid slightly overbought conditions and ahead of Brexit talks.

The GBP/USD pair caught fresh bids during the early European session and shot to the highest level since October 29, around the 1.3745 region in the last hour.

Following a brief consolidation earlier this Thursday, the GBP/USD pair regained positive traction and scaled higher for the third successive day. The momentum was sponsored by the post-US CPI selling pressure surrounding the US dollar, which remained unabated through the first half of the trading.

Given that the markets have fully priced in a March Fed rate hike, a surge in the US CPI was taken as a “sell the fact” opportunity and prompted aggressive USD long-unwinding on Wednesday. Even rebounding US Treasury bond yields and a softer risk tone did little to lend any support to the safe-haven USD.

Apart from this, the ongoing positive move could further be attributed to technical buying following the previous day's sustained breakthrough a descending trend-line resistance extending from July. Bulls seemed unaffected and shrugged off the latest political development in the United Kingdom.

The chances of UK Prime Minister Boris Johnson resigning are rising amid calls from within the Conservative party after an admission that he attended a party when gatherings were not allowed in England. This could act as a headwind for the British pound ahead of key Brexit talks on Thursday.

Even from a technical perspective, the RSI (14) on the daily chart has started flashing near-term overbought conditions. This further warrants some caution for aggressive bullish traders and before positioning for an extension of the recent appreciating move witnessed since December 20.

In the absence of any major market-moving economic releases from the UK, traders might take cues from the US economic docket – featuring the Producer Price Index and Weekly Jobless Claims. This, along with Fed Governor Lael Brainard's testimony on her nomination as Vice-Chair, will influence the USD.

Traders will further take cues from any Brexit-related headlines, which might further contribute to producing some meaningful trading opportunities around the GBP/USD pair.

Technical levels to watch