The GBP/USD pair extended gains into a second day above 1.2400 on Wednesday after higher-than-anticipated United Kingdom inflation figures. At the same time, the dollar has found it difficult to maintain demand despite the sour market mood. At the time of writing, the GBP/USD pair is trading at 1.2440, 0.2% above its opening price.
The National Statistics Office of the U.K. released the Consumer Price Index (CPI) annual inflation rate, which came in at 10.1% in March, above the consensus of 9.8%.
Meanwhile, the core inflation rate was 6.2%, above the 6% expected. British bond yields rose across the curve as a reaction, supporting the pound’s gains as markets have completely priced in a 25 rate increase by the Bank of England (BoE) at their next meeting.
Across the pond, the bond yields also advanced, with the United States 10-Year yield trading at 3.59% and the 2-year rate at 4.28%. While markets are still digesting inflation and labor market data, according to the WIRP tool, investors are betting on higher probabilities of 85% of a 25 bps hike in the next May 3 meeting.
From a technical perspective, the GBP/USD maintains a neutral-to-bullish short-term outlook as indicators turned flat on the daily chart but remain above their midlines while the price heads higher above its main moving averages.
Next resistance levels could be faced at the 1.2490-1.2500 area, followed by last week’s multi-month peak of 1.2546. On the downside, the 20-day SMA at 1.2390 stands as support ahead of the 1.2300 psychological level.