GBP/USD Posts Fresh Highs on BoE expectations

At 1.3490, the GBP/USD pair is trading near to the highs of Wednesday’s US session. This move signals the pair’s ability to depart a 1.3396 a low to start climbing to a one-week high after data showed UK inflation surged to a 10-year high last month.

The pound is significantly firmer due to the expectations of an interest rate hike as early as next month following a week of better than expected data. On Tuesday, UK posted positive data showing Britain’s job market endured the end of the governmental furlough scheme.

The Bank of England is consequently expected to join the Reserve Bank of New Zealand as one of the first major central banks to hike interest rates since the coronavirus pandemic hit economies worldwide.

The markets are now pricing a 60% chance that the BoE will raise rates on 16 December meeting. The US dollar has drifted lower from a new 16-month high that was printed on Tuesday as markets expect Fed to hike rates by as early as mid-2022.

The dollar index, DXY, is down around 0.13%, trading at 95.788 within the session’s range of between 95.734 and 96.241 compared to Tuesday’s high; 96.266, the best level marked since July 2020.