• UK inflations accelerates unexpectedly  in February, ahead of BoE decision.
• US Dollar mixed as traders await Federal Reserve's announcements.
• GBP/USD retreats from six-week highs toward 1.2200.

The GBP/USD retreated more than 70 pips from the six-week high it reached earlier of 1.2297 and dropped to 1.2218 as Pound's momentum following UK CPI faded, ahead of the Federal Reserve's decision.

Pound erases gains, DXY holds to losses

Earlier on Wednesday, the UK inflation numbers surprised to the upside. The Consumer Price Index rose from 10.1% to 10.4% YoY, against expectations of a modest decline. The unexpected accelerations boosted the Pound, that then gave back all gains.

The inflation numbers increased the pressure on the Bank of England which will announce on Thursday its decision on monetary policy. A 25 bps rate hike is now more firmly expected.

The Fed announces its rate decision at 18:00 GMT. The consensus forecast indicates a 25 bps hike to 4.75% - 5.00%. The statement, the projections and Chair Powell's press conference could be as important as the rate decision considering the uncertainty surrounding the meeting.

Ahead of the meeting, the US Dollar Index is falling 0.15% as US yields move away from daily highs. GBP/USD is hovering around 1.2240 as a weaker US Dollar helped the pair find demand. The bias is still to the upside, with immediate support levels at 1.2220 and 1.2200/05. On the upside, a consolidation above 1.2300 could open the door to more gains.

Technical levels