GBP/USD surged to a two-month high of 1.2641 after UK CPI data came in hotter than expected, reinforcing expectations that the Bank of England will maintain a less dovish stance. However, gains were capped as concerns over U.S. trade policies and fading optimism around a Ukraine ceasefire weighed on market sentiment. Despite the pullback, sterling remains anchored above key support at 1.2573 (daily cloud top), with additional support at 1.2550 (February 14 low) and 1.2505 (10-DMA). The UK-U.S. rate differential has continued to narrow, providing additional support for GBP/USD.

Technically, the trend remains bullish, with resistance at 1.2641 (Wednesday high), 1.2659 (falling 100-DMA), and 1.2737 (200-WMA). A close above these levels would confirm further upside potential, targeting the 200-DMA at 1.2788. On the downside, GBP/USD remains supported above 1.2573, with a break below potentially leading to a retest of the 1.2500 region. The broader uptrend remains intact as long as the pair holds above these support levels.

The upcoming Fed minutes will be key for market direction, particularly if they provide clues on the timing of the next rate cut. Current market expectations suggest a 50% chance of a Fed cut in June and a total of -35bps by year-end 2025, compared to the BoE’s expected 50bps in cuts. While the macro backdrop favors sterling, risks include potential trade disruptions from U.S. tariff policies, which could strengthen the USD. As long as GBP/USD stays above 1.2573, the near-term outlook remains bullish, with a potential push toward 1.2788 in the coming sessions.