GBP/USD clings to gains near session tops, around 1.2580 region post-UK CPI

• GBP/USD regained traction on Wednesday built on the overnight rebound from one-week lows.
• The risk-on mood undermined the safe-haven USD and extended some support to the major.
• Hotter-than-expected UK CPI remained supportive of the bid tone surrounding the British pound.

The GBP/USD pair maintained its bid tone near session tops, around the 1.2580 region and moved little post-UK inflation figures.

The pair caught some bids on Wednesday and built on the previous day's solid intraday bounce of around 85 pips from the 1.2480 region, or one-week lows. The positive move was sponsored by a weaker tone surrounding the US dollar, which remained depressed amid the upbeat market mood.

The latest optimism about a coronavirus vaccine overshadowed concerns about surging COVID-19 cases in the US, which pushed California back into lockdown. This, in turn, bolstered investors' appetite for perceived riskier assets and continued undermining demand for the safe-haven USD.

Meanwhile, the British pound was further supported by Wednesday’s release of hotter-than-expected UK consumer inflation figures. In fact, the headline CPI rose by 0.6% in June as compared to a modest downtick to 0.4% anticipated from 0.5% previous. The yearly rate also came in better than market expectations and edge higher to 1.1% from 1.0% recorded in May, easing worries about deflationary pressures from the economic downturn.

The pair, however, had a rather muted reaction and lacked any strong follow-through buying, possibly on the back of persistent Brexit-related uncertainties. With the key UK macro data out of the way, the broader market risk sentiment and the USD price dynamics should continue to play a key role in influencing the GBP/USD pair's momentum on Wednesday.

Later during the early North American session, the US economic docket – highlighting the release of Empire State Manufacturing Index and Industrial Production – will be looked upon for some meaningful trading opportunities.

Technical levels to watch