GBP/USD rose on Wednesday after UK CPI data hinted the BoE is likely to remain in hike mode for longer, lifting cable above its rising 55-DMA at 1.2850 and negating negative cross tones, though bears remain in control while below 1.2881, the 50% Fib of 1.3144-1.2617.

While CPI came in near forecast, the core components, monthly and yearly, exceeded expectations, hinting at stickier inflation than thought, diminishing the chances of a softer BoE rate path may be premature.

Supporting bullish sterling expectations are diverging UK-U.S.
rate spreads, which currently show the BoE hiking 73bp by February 2024, while the Fed is seen keeping rates steady until March 2024, at which time futures price a 96% chance for a U.S. cut of 25bp.

Further out the rate strip, the BoE is expected to continue hiking 0#SON: and keep rates higher than the Fed 0#SRA:, which should keep GBP/USD rebounding.

A close above the 100-DMA at 1.2750 would put the 30-DMA at 1.2839 in focus and open the way for a test of 1.2881, the 50% Fib of 1.3144-1.2617, above which momentum shifts to GBP bulls for a further retrace of declines from mid-July highs above 1.30.

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