Sterling inches higher after Lagarde’s comments

After the Federal Reserve decided to raise rates by the same amount on Wednesday, GBP/USD surged to new highs. The ECB’s statement that went along with it emphasised signs of ongoing inflation pressures in the Eurozone.

Following hawkish remarks made by Christine Lagarde, president of the European Central Bank, on Thursday, the British Pound returns to year-to-date highs just shy of 1.2600 against the US Dollar.

The Euro, as well as the Pound Sterling, recovered against the US Dollar following an initial bearish reaction to the ECB policy announcement after Lagarde emphasised the inflationary headwinds in the euro area during her press conference and the ECB’s determination to continue tightening monetary policy to ward off future price increases.

If Friday’s Nonfarm Payrolls (NFP) jobs report falls short of forecasts (bearish for USD, bullish for GBP/USD) or comes in significantly higher (bullish for USD, bearish for GBP/USD), GBP/USD may experience additional volatility.

From a technical perspective, GBP/USD continues to edge higher within a range, which is part of a broader bullish trend that began at the September 2022 lows. Longs are, therefore, favored over shorts.