GBP/USD rallies above 1.2200 on soft US Dollar, BoE’s comments

The Pound Sterling (GBP) advances against the US Dollar (USD) early in the North American session due to an upbeat market mood on speculations that the US Federal Reserve (Fed) would slowdown rate hikes in a week that an inflation report in the United States is the spotlight. At the time of writing, the GBP/USD is trading at 1.2205.

UK politics and hawkish BoE commentary lift the GBP/USD

Wall Street opens with solid gains. An absent US economic docket on Monday keeps traders adrift to UK news. As reported by Reuters, UK Prime Minister Rishi Sunak said that inflation is not guaranteed to decline in 2022 and that the government would need to be disciplined to curb inflation. Regarding strikes and other themes, UK’s PM Sunak added that he was willing to discuss pay increases for nurses in an effort to finish strikes.

In the meantime, Bank of England (BoE) policymakers led by Catherine Mann said that energy price caps could bring inflation up in other sectors as it could boost consumer spending. She added that what would happen to inflation is unclear when lids are removed.

At the time of typing, the BoE Chief Economist Huw Pill said that the BoE would continue to act to reach the inflation target, saying that the Monetary Policy Committee (MPC) “will respond forcefully” if needed. Pill stated that domestic prices and wages are key to the MPC outlook.

GBP/USD Price Analysis: Technical outlook

After breaching the 200-day Exponential Moving Average (EMA), the GBP/USD closes toward the 1.2200 mark, printing a three-week new high. The twelve-day consolidation period appears to end, and if the GBP/USD clears the 1.2200 figure, that could pave the way for December’s 19 daily high of  1.2242, which, once cleared, could open the door for a rally to 1.2300.

Oscillators like the Relative Strength Index (RSI) show buyers gathering momentum, while the Rate of Change (RoC) woke up and aimed higher after showing lower levels of volatility.