GBP/USD rallied to a 2024 peak of 1.2975, undeterred by higher-than-expected U.S. producer price inflation, as the pair continued its gradual climb towards the July 2023 highs above 1.30. Following the soft U.S. CPI data on Thursday, market sentiment has shifted towards more dovish Fed policy expectations, lifting GBP/USD from lows near 1.28 to an 11-1/2 month high at 1.2975. If upcoming U.S. data continue to indicate employment declines and a slower rate of inflation, sterling is likely to rise further towards the July 2023 high of 1.3144.

With Fed policy expectations well understood after the dip in core and headline CPI, the key factors for sterling bulls will likely be UK economic data and Bank of England (BoE) guidance. While there has been an increase in dovish expectations for the BoE, evidenced by the recent 7-2 vote to hold rates and one vote to cut, the June BoE statement highlighted that employment remains tight. Recent wage data supported this view, potentially delaying BoE rate cuts compared to the Fed, which could benefit GBP bulls through the summer.

In New York afternoon trade, GBP/USD was firm at 1.2983, up 0.52%, within a Friday range of 1.2991-1.2913. The pair hit a new one-year high as expectations for Fed rate cuts grew post-CPI and University of Michigan data. Year-end 2024 rate expectations show a divergence, with the Fed expected to cut by 62 basis points and the BoE by 49 basis points, supporting sterling. Upcoming UK CPI and RPI data on July 17 will be crucial for insights into the BoE's near-term policy path.

Technically, GBP/USD finds support at the rising 21-hour moving average (HMA) of 1.2940, Friday's low of 1.2913, and the 200-week moving average (WMA) at 1.2848. Resistance is seen at Friday's high of 1.2991, the psychological 1.3000 level, and the July 19, 2023 high of 1.3041. GBP bulls remain in control as long as the pair stays above the 50% Fibonacci retracement level of 1.2802, measured from the 1.2613 low to the 1.2991 high.

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