GBP/USD is gaining further upside momentum, breaking past the key 1.2500 level to reach new multi-day highs in response to increased selling pressure on the Greenback.
The Relative Strength Index continues to push higher but remains below 70, suggesting that there is more room on the upside for GBP/USD before it turns technically overbought.
Looking north, the first resistance level could be spotted at 1.2530 (Fibonacci 61.8% retracement of the latest downtrend) before 1.2600 (round level, static level) and 1.2650 (Fibonacci 78.6% retracement).
On the downside, 1.2450 (Fibonacci 50% retracement) aligns as first support before 1.2420 (100-period Simple Moving Average (SMA)) and 1.2380-1.2370 (200-period SMA, Fibonacci 38.2% retracement).
The UK's Office for National Statistics (ONS) reported early Thursday that the UK's Gross Domestic Product (GDP) expanded at an annual rate of 1.4% in the fourth quarter. This reading followed the 1% growth recorded in the previous quarter and surpassed the market expectation of 1.1%. Other data from the UK showed that Industrial production and Manufacturing Production increased by 0.5% and 0.7%, respectively, on a monthly basis in December.
On Wednesday, the positive shift seen in risk mood made it difficult for the USD to outperform its rivals, despite the stronger-than-forecast January inflation data. The Consumer Price Index (CPI) rose by 3% on a yearly basis, coming in above the market expectation and December's increase of 2.9%. Additionally, the core CPI, which excludes volatile food and energy prices, rose by 0.4% on a monthly basis, following the 0.2% rise recorded in the previous month.
Growing optimism about a Russia-Ukraine truce and a lack of fresh headlines surrounding US President Donald Trump's trade policy allowed risk flows to return to markets. In a social media post, Trump said that he had a "lengthy and highly productive" phone call with Russian President Vladimir Putin to begin negotiations to end the war in Ukraine, while refraining from announcing reciprocal tariffs.
According to CNBC, however, Trump could still unveil his reciprocal tariff plan before he meets with Indian Prime Minister Narendra Modi on Thursday. If that were to come to fruition, markets could adopt a cautious stance and make it difficult for GBP/USD to build on its daily gains.
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