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As the dust settles where next for the GBP/USD?

As the dust settles on the latest UK inflation data, the Pound just rebounded again and that saw the GBP/USD lift back above the 1.22 handle once more. The immediate range seen in the GBP/USD so far this week has been covered by 1.2140 and 1.2250 and since the release of the UK inflation reports that range has remained intact. To be honest, right now the markets seem rather confused as how to take this inflation news. On the one hand it is potentially positive for the economic outlook and interest rate cuts going forward but on the other hand it is not conducive to higher UK yields. Well, perhaps not so high as they have been. Ahead of this data, the markets were pricing the chances of a BOE rate cut next month at around 60%. Subsequent to the data they are now pricing it around 80%. We shall have to see where the Gilt markets open up shortly to see how this really pans out for the Pound and perhaps we should not place too much emphasis on just one months set of data? So, in essence the Pound is still trapped inside that noted range, but it might not remain that way for long and right now the GBP/USD is giving a good impression that it might just want to test the topside shortly. The GBP/USD is currently trading at 1.2211 
 

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