Upside chance fundamentally hinges on next week's CPI and BoE minutes among other data IBTimes UK/FXStreet

Sterling's rally on the hawkish inflation report by the Bank of England has pushed it through the 50-day moving average and the upside barrier of a downward channel, exposing higher levels, with the market awaiting the January inflation and MPC minutes due next week.

GBP/USD rose to 1.5421 on Friday, a 40-day high, up 1.2% from Wednesday's close. Much of this gain came after the BoE inflation report on Thursday, in which the central bank revised its inflation and growth projections upward for the two and three-year horizons.

Later on Thursday, the US retail sales data came weaker than expected, further aiding the UK unit against the greenback. The calendar has nothing left for the UK for Friday, and the focus is now on the January CPI inflation and the minutes of the BoE policy review done two weeks ago.

The pair is now aiming 1.5486, a break of which opens up 1.5621 ahead of 1.5827. The upside chances are relevant only if the 1.5271 support is held, which is the first downside level to watch out for. A break of that will take the pound to $1.5139 and then the 23 January low of 1.4951.

Inflation as well as BoE minutes in January were dovish surprises and the trend is unlikely to be different in the case of the price rise and overall minutes message.

However, there are more items for the UK calendar like ILO unemployment rate, retail sales and producer prices data increasing the likelihood of hawkish surprises some time during the week.