Sterling soars to fresh highs after US Inflation data

Sterling soars to fresh highs after US Inflation data
The Pound Sterling (GBP) has risen sharply versus the US Dollar (USD) after the release of US Consumer Price Index (CPI) data for April. This data has given the broader long-term GBP/USD uptrend impetus to extend.

The Pound Sterling (GBP) rallies sharply versus the US Dollar (USD) after the release of US Consumer Price Index (CPI) data for April on Wednesday. At the time of writing, it has risen to new year-to-date highs in the 1.2670s. The post-release surge adds fuel to the bullish long-term technical uptrend, advantaging long over short holders.

The Pound gains versus the US Dollar due to a widening monetary policy divergence since in the UK interest rates are still expected to rise substantially higher, and currencies that have higher interest rates benefit from greater demand. The Bank of England (BoE) policy meeting on Thursday is expected to raise 25 bps interest rates, but the BoE’s forward guidance, BoE Chairman Andrew Bailey’s comments in the press conference, and the distribution of member votes are less certain.

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the BoE, which bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%.