• GBP/USD adds to its intraday gains and rallies to a one-and-half-week high amid a brutal USD selloff.
• A weaker US CPI report pushed back expectations for a larger Fed rate hike and weighed on the USD.
• A strong rally in the US equity futures exerts additional downward pressure on the safe-haven buck.

The GBP/USD pair catches aggressive bids and surges past the 1.2200 mark, hitting a one-and-half-week high during the early North American session.

The intraday US dollar selling picks up pace following the release of weaker US consumer inflation figures, which, in turn, provides a goodish lift to the GBP/USD pair. The Bureau of Labour Statistics reported that the headline US CPI remained flat in July against the 0.2% rise anticipated. Adding to this, the yearly rate decelerated to 8.5% during the reported month, again missing estimates pointing to a fall to 8.7% from the 9.1% in June.

Furthermore, core inflation, which excludes food and energy prices, came in at 0.3% MoM and held steady at a 5.9% YoY rate vs 0.5% and 6.1% anticipated, respectively. The softer data now seems to have pushed back market expectations for a larger Fed rate hike move at the September policy meeting and prompts aggressive selling around the USD. Apart from this, a strong rally in the US equity markets exerts additional pressure on the safe-haven buck.

The strong intraday move up allowed the GBP/USD pair to break through the 1.2130-1.2140 resistance zone, triggering an aggressive short-covering move. Hence, it remains to be seen if the momentum is backed by genuine buying or turns out to be a stop run amid the Bank of England's gloomy economic outlook.

Technical levels to watch