GBPUSD H1 17-04
GBP/USD hourly chart

To be honest, the reaction here is a little surprising as the inflation numbers were just a slight beat on estimates. But it seems that it doesn't take much to spook markets these days, especially with the Fed outlook changing quite drastically since the start of the year.

GBP/USD is now up 0.4% to 1.2477, brushing against its 100-hour moving average (red line). Keep below that and sellers will retain near-term control. But push past that and the near-term bias switches to being more neutral with minor resistance and offers lined up closer towards 1.2500 next.

Looking at BOE rate cut odds, the probability of a rate cut in August is now down to ~60% from ~71% before the data. Meanwhile, the total rate cuts priced in for the year is now at 37 bps compared to 42 bps before the data.

I'd argue that the extent of the moves sound just about right in terms of the BOE outlook. But as for the pound, I'd be inclined to fade the jump in cable that we're seeing.