Cable has come a long way very quickly and has now reclaimed the big 1.25 level. GBP/USD could climb back to the 1.26 area on a stronger EUR/USD fueled by robust eurozone Consumer Price Index (CPI) data, economists at ING report.

Overcooked?

“Short-term financial fair value models have gone a little awry, where yield curves and equity markets are now bigger drivers of sterling than rate differentials. In other words, it looks as though sterling is being traded more on growth prospects at the moment.” 

“European FX could get a small lift today if eurozone CPI surprises on the upside and the ECB hawks come out in force. That could carry EUR/GBP back to 0.8450/60, but a stronger EUR/USD could carry GBP/USD back to the 1.2570/2600 area on the day.”

See – Eurozone HCPI Preview: Forecasts from six major banks, not peaking yet