MUFG Research discusses GBP outlook in light of yesterday' UK inflation data for the month of July.

"The pound was carried only briefly yesterday on the back of UK inflation data that surprised on the upside. Core CPI data surprised on the upside, coming in at 1.9% over an expected 1.8%. Headline CPI was similarly higher at 2.1%, over expectations of 1.9%. This was enough to drive the pound higher against the dollar, testing a ceiling around the 1.2100 level for the third day in a row on a data surprise. However it will likely prove insufficient to support the pound much above the 1.2050 level. This data further muddies the water for the BoE when it comes to the domestic economy in the UK," MUFG adds.