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Cable (GBP/USD) is nudging higher in early trade, helped by a marginally weaker US dollar and an accommodative UK gilt complex, ahead of two important data releases later in the week. The 10yr UK benchmark gilt is trading with a yield of 1.435%, down from a multi-year high of 1.50% made on Tuesday but still nearly 50 basis points higher on the year. The gilt market has been pricing in a series of further UK rate hikes over the last few weeks and this is underpinning the British Pound against a range of other currencies.

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The Bank of England’s 25 basis point rate hike last week to 0.50% is expected to be followed by a further 25bp hike at the next MPC meeting in March with further hikes priced in throughout the year as the central bank grapples with a multi-decade high inflation rate (5.4%). At the last MPC meeting, the BoE said that inflation may hit in excess of 7% in the short term. Rates markets are now pricing in a Bank Rate of 1.5% by the end of 2022.

In the short term, cable will be moved by the latest look at US inflation on Thursday (13:30 GMT) and the December UK GDP numbers that will be released on Friday (07:00 GMT). Both releases need to be closely followed by GBP/USD traders.

The outlook for GBP/USD remains mixed on the daily chart with a series of lower highs still in place, while the recent series of lower lows was broken at the end of January. The pair are trapped in the middle of all three simple moving averages adding to the mixed outlook. Initial resistance comes is seen around 1.3630 while support is seen at 1.3515.