GBP/USD eases from one-week highs, up little below mid-1.3400s

• GBP/USD shot to a one-week high in reaction to hotter-than-expected UK CPI print.
• Bulls struggled to find acceptance above 100-hour SMA amid persistent Brexit woes.
• Fed rate hike bets acted as a tailwind for the USD and also collaborated to cap gains.

The GBP/USD pair surrendered a major part of the stronger UK CPI-inspired gains and was last seen trading below mid-1.3400s, still up nearly 0.15% for the day.

Having shown some resilience below the 1.3400 mark, the GBP/USD pair regained positive traction on Wednesday and shot to a one-week high in reaction to hotter-than-expected UK CPI print. The UK Office for National Statistics (ONS) reported that consumer prices surged to 4.2% in October, marking the fastest pace since December 2011.

Against the backdrop of Tuesday's upbeat UK employment details, the data reassured expectations for an imminent rate hike by the Bank of England in December and provided a strong lift to the British pound. Apart from this, the intraday US dollar pullback from a 16-month peak further provided an additional boost to the GBP/USD pair.

Bulls, however, struggled to capitalize on the move or find acceptance above the 200-hour SMA amid worries that the UK government could trigger Article 16 of the Northern Ireland Protocol. The intraday uptick ran out of the steam near the 1.3470-75 region, which should now act as a key pivotal point for the GBP/USD pair's near-term trend.

Meanwhile, the prospects for an early policy tightening and elevated US Treasury bond yields continued lending some support to the greenback. In fact, the markets have been pricing in the possibility for an eventual Fed rate hike move by July 2022. This was seen as another factor that collaborated to cap any meaningful upside for the GBP/USD pair.

Looking at the broader picture, the emergence of fresh selling at higher levels warrants some caution before positioning for any meaningful appreciating move. A subsequent slide back below the 1.3400 mark will be seen as a fresh trigger for bearish traders and turn the GBP/USD pair vulnerable to challenge YTD lows, around mid-1.3300s touched last Friday.

Technical levels to watch