GBP/USD treads water around 1.3300 on Dollar's bounce

GBP/USD is fluctuating around the 1.3300 support on Wednesday, giving back its earlier push toward the 1.3370 zone amid a solid rebound in the Greenback. Cable’s initial gains had been underpinned by hawkish comments from BoE officials, ahead of a packed UK data calendar on Thursday.

GBP/USD Technical Overview

The Relative Strength Index (RSI) indicator on the 4-hour chart rises above 60, pointing to a buildup of bullish momentum. Additionally, GBP/USD closed the last two 4-hour candles above the 50-period and the 100-period Simple Moving Averages (SMA).

On the upside, 1.3400 (static level) aligns as next resistance for GBP/USD ahead of 1.3450 (end-point of the latest uptrend) and 1.3500 (static level, round level). Looking south, supports could be seen at 1.3300 (static level, 100-period SMA), 1.3260 (Fibonacci 23.6% retracement) and 1.3180 (200-period SMA).

Fundamental Overview

April inflation data from the US weighed on the USD on Tuesday, opening the door for a leg higher in GBP/USD during the American trading hours.

The US Bureau of Labor Statistics reported that annual inflation, as measured by the change in the Consumer Price Index (CPI), edged lower to 2.3% in April from 2.4% in March. In the same period, core CPI inflation held steady at 2.8%, as forecast. On a monthly basis, the CPI and the core CPI both rose by 0.2%, below the market expectation of 0.3%.

Meanwhile, Bank of England (BoE) policymaker Catherine Mann said early Wednesday that the UK labor market has been more resilient than expected and added that increasing inflation expectations are worrying. These comments seem to be supporting Pound Sterling as well.

In the second half of the day, market participants will pay close attention to comments from Federal Reserve (Fed) officials. The CME Group FedWatch Tool shows that markets are currently pricing in a less than 10% probability of a 25 basis points (bps) rate cut in June. In case Fed policymakers acknowledge softer CPI prints and adopt a more optimistic tone on the inflation outlook, the USD could remain under pressure.