Cable has taken advantage of the generally weak US Dollar (USD) and some slightly hotter than expected UK CPI data to advance through the 1.30 point to reach its highest in a year, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Broader progress towards 1.33 looks feasible

“Headline CPI rose 0.1% M/M in June, as expected but inflation held at 2.0% in the year (versus a forecast decline to 1.9%). Core prices were steady also and Service sector inflation was unchanged in the year at a lofty 5.7%. The data further compromised prospects for an early August BoE rate cut, with swaps now pricing in less than 10bps of easing risk.”

“Note that the IMF’s latest forecasts indicated the UK economy would be among the fastest, if not the fastest, growing major European economy next year (1.5%, just ahead of the 1.3% pace predicted for Germany and France).”

“GBP/USD’s push above 1.30 adds to a positive technical backdrop that is shaped by solid price gains over the past couple of weeks, a clear move above the early March high and an alignment of bullish trend indicators across the short-, medium– and long-term trend oscillators. Gains should target a return to the 1.3150 zone initially but broader progress towards 1.33 looks feasible in the coming weeks. Support is 1.2950/75.”