The greenback kept retreating during the past Asian session as risk sentiment improved, led by a rally in commodity-related currencies and resulting in the pound/dollar rallying to 1.2276.
Nevertheless, the release of the U.K. inflation data sent the pair back lower. The Consumer Price index rose by 1.0% in the year to September, the highest since November 2014. The year-over-year core figure was up to 1.5%; on a monthly basis, inflation surged by 0.2%.
The price of goods bought and sold by U.K. manufacturers, as estimated by the Producer Price Index, was up for the third consecutive month, printing 1.2% when compared to a year before, and by 0.2% monthly basis. The figures beat markets expectations and suggest there's no need for further easing in the U.K.
Later Tuesday, the U.S. will release its own September inflation figures, expected above August readings. Better-than-expected numbers will likely fuel hopes of a December hike and therefore boost the greenback.
Technically, the four-hour chart for the pound/dollar pair presents a modest bullish stance, given that the pair has advanced above its 20 SMA that anyway remains flat around 1.2200, while technical indicators have entered positive territory, although the RSI is losing upward momentum around 52, indicating limited upward strength.
The pair has had multiple intraday highs in the 1.2270 region in the last two weeks, which means that it will take a clear break beyond it to confirm another leg higher, up to the 1.2330/50 region. However, if the pair eases back below the 1.2200 level, the risk is back toward the downside, with scope to test 1.2130/60 during the American afternoon.
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