• GBP/USD lost nearly 200 pips after the US inflation data.
• Core CPI in the US rose at a stronger pace than expected in August.
• US Dollar Index jumped above 109.00, reflecting broad dollar strength.

GBP/USD came under heavy bearish pressure and erased nearly 200 pips in less than 30 minutes after the US inflation data. The pair was last seen losing 1.05% on a daily basis at 1.1557.

The US Bureau of Labor Statistics reported that the Core Consumer Price Index climbed to 6.3% in August from 5.9% in July. This print surpassed the market expectation of 6.1%. Although the headline CPI edged lower to 8.3% from 8.5% in the same period, it still arrived above analysts' forecast of 8.1%.

The benchmark 10-year US Treasury bond yield is up nearly 3% on the day and the US Dollar Index is rising 1% at 109.35. According to the CME Group's FedWatch Tool markets are currently fully pricing in a 75 basis points rate hike in September. 

The hot inflation report also weighed on risk mood. Nasdaq Futures, which was up 1% earlier in the day, is now losing more than 3%.

Earlier in the day, mixed labour market data from the UK helped the British pound find demand but the reaction to the US data clearly shows that the dollar's market valuation is the primary driver of the pair's action.

Technical levels to watch for