• GBP/USD spiked up to refresh daily top after upbeat UK inflation data for July.
• UK CPI rose past market expectations and prior to 10.1% for July.
• US dollar pullback, softer yields also underpin bullish bias ahead of US Retail Sales, FOMC Minutes.

GBP/USD picks up bids to refresh intraday high around 1.2145 after the UK released headline inflation numbers for July. In doing s, the Cable pair extends the previous day’s recovery from the weekly low.

UK Consumer Price Index (CPI) rose to 10.1% YoY versus 9.8% expected and 9.4% previous readings while the Core CPI, which excludes volatile food and energy items, rose to 6.2% versus 5.9% market consensus and 5.8% previous readouts.

Also read: Breaking: UK annualized inflation leaps to 10.1% in July vs. 9.8% expected

Not only CPI, but upbeat prints of the Retail Price Index, to 12.3% YoY compared to 12.0% expected and 11.8% prior, also favored the GBP/USD buyers as the Bank of England (BOE) has long been criticized for undertaking a softer attack on inflation mainly by the current UK PM front runner Liz Truss and her team.

In addition to the firmer UK inflation figures, the US dollar’s pullback ahead of the key Federal Open Market Committee (FOMC) meeting minutes also favors the GBP/USD bulls.  That said, the US Dollar Index (DXY) refreshed its three-week high before reversing from 106.94, down 0.10% near the intraday low of 106.35 at the latest. The DXY losses could be linked to the market’s preparations for the key data/events amid increasing hawkish Fed bets.

“Investors now see a 41% chance of a third successive 75 bps rate hike at the Fed's next meeting in September, up from 39% the previous day. Minutes from the previous meeting will be released later today,” said Reuters.

Against this backdrop, US 10-year Treasury yields fade the previous day’s rebound while S&P 500 Futures seesaw near a four-month high.

Having witnessed the initial reaction to the UK inflation data, the US Retail Sales for July, expected 0.1% versus 1.0% prior, will precede the FOMC meeting minutes will be crucial for the GBP/USD pair traders amid recently increasing hawkish bets on the Fed.

Technical analysis

GBP/USD approaches a one-week-old resistance line while portraying the third bounce off the 50% Fibonacci retracement level of July-August advances.

In addition to the sustained rebound from the key Fibonacci support, steady RSI and a looming bull cross of the MACD also keep the GBP/USD buyers hopeful of overcoming the 1.2110 immediate hurdle.

Alternatively, pullback moves may initially test the 200-SMA, around 1.2045 at the latest, before revisiting the 50% Fibonacci retracement level of 1.2030.