Rebound may extend to the mid-1.27s – Scotiabank

GBP/USD soars on higher-than-expected UK Consumer Price Index (CPI) data. Economists at Scotiabank analyze the pair’s outlook.

Markets pared BoE rate cut expectations further in response to upside CPI surprise

UK CPI for December came in at 0.4% MoM, double the market consensus. Prices rose 4.0% in the year, up from 3.9% in November (versus 3.8% expected). Markets pared BoE rate cut expectations further in response to the data. 

Sterling’s snap higher from the intraday low just under 1.2600 preserves the broader 1.2600/1.2825 trading range for the past month for a little longer. 

Intraday price action is supportive and may see the Pound’s rebound extend modestly (to the mid-1.27s) in the near-term.