Title: GBP/USD renews daily top above 1.2100 on firmer UK Inflation, focus on Fed Minutes
August 17, 2022 02:11 AM ET
After the UK released inflation figures for July, GBP/USD rises to fresh daily highs around 1.2145, extending its recovery from the previous day's weekly low.
The UK Consumer Price Index (CPI) rose to 10.1% versus 9.8% expected and 9.4% previous, while the Core CPI, which excludes volatile food and energy, rose to 6.2% versus 5.9% market consensus and 5.8% previous.
Not only the consumer price index, but also the retail sales index, which was positive at 12.3% versus 12.0% (expected) and 11.8% (previous), favored GBP/USD buyers as the Bank of England (BOE) has long been criticized for its softer approach to fighting inflation, especially by current frontrunner for UK prime minister Liz Truss and her team.
In addition to firmer UK inflation numbers, the pullback in the U.S. dollar ahead of the key Federal Open Market Committee (FOMC) meeting minutes also favored GBP/USD bulls. Nevertheless, the U.S. dollar index (DXY) hit its three-week high once again before retreating 0.10% from 106.94 to the intraday low of 106.35. The DXY losses could be related to the market preparing for important data or events against the backdrop of increasingly hawkish Fed bets.
Against this backdrop, U.S. 10-year Treasury yields gave up the previous day's rally, while S&P 500 futures hovered near a four-month high.
Following the initial reaction to UK inflation data, US retail sales for July, expected at 0.1% versus 1.0%, will precede the FOMC meeting minutes and be crucial for GBP/USD traders given the recent increase in hawkish Fed bets.