GBP/USD trims gains and retreats to 1.3850

• Cable trims gains versus dollar, turns negative against euro.
• Dollar holds onto losses, affected by Powell’s remarks.

The GBP/USD peaked hours ago at 1.3891 and then pulled back, finding support around the 1.3850 area. It remains far from the daily top, still moving sideways between 1.3900 and 1.3800, as it has been the case during the current week.

Earlier, the pound rose across the board, supported by inflation data from the United Kingdom. In June, the CPI rose to 2.5%, above the2.2% expected. On American hours, the sterling lost strength and turned negative versus the euro.

At the moment of writing, while GBP/USD trades near the middle of the daily range around 1.3860, EUR/USD is at fresh highs above 1.1830.

Powell talks, dollar drops

Chair Powell, who is speaking with lawmakers, mentioned inflation will likely remain elevated over the coming months before moderating. He said the labor market still has a long way to go suggesting no QE tapering in the short term. His comments weakened the US dollar that trimmed the gains that followed recent higher-than-expected US inflation data.

Later on Wednesday, the Fed will release the Beige Book about the state of the economy. Employment data is due on Thursday in the UK. In the US, jobless claims, the Philly Fed, and industrial production data are due. Also Fed Chair Powell will again testify on monetary policy.

Technical levels