GBP supported by the stong CPI
British pound strengthened in the European session as the UK inflation data came mostly better than expected. June CPI came out much better than expected at +0.2% m/m and +1.9% y/y vs. -0.1% m/m and +1.6% y/y.
GBP/USD came under bearish pressure before the release as many market players expected to see a lower CPI, but soared from the daily $1.7058 low to $1.7145 on the news. The cable has fully retraced the recent bearish correction. Investors took the data as a confirmation of UK economic recovery and a sooner rate hike.
Traders will now switch their attention to the UK labor data release on Wednesday. May unemployment rate is expected to decline from 6.6% to 6.5%, what could support the GBP. Claimant count is forecasted to contract by 27.1K in June (prior: 27.4K).
Chart. H4 GBP/USD