The GBP/USD currency pair today rallied higher after the release of UK inflation data for January as measured by the consumer price index. The currency pair later declined as the US dollar gained strength across the board, but did not give back all its gains.
The GBP/USD currency pair gained over 90 points from an initial low of 1.3831 to hit a high of 1.3925, then later declined to an intra-day low of 1.3851.
The currency pair rallied higher after the release of the UK consumer price index for December by the Office for National Statistics. The report indicated that UK consumer prices contracted by 0.5%, which was much less than the expected 0.6% decline. The CPI also recorded an annualized growth rate of 3.0%, which was higher than the consensus estimate of 2.9% growth. The core CPI also came in at 2.7%, which was slightly higher than the expected 2.6%. The positive inflation data increased market expectations of more aggressive rate hikes by the Bank of England this year.
The recovery in the US dollar demand as tracked by the US Dollar Index, which hit a high of 90.18 earlier today contributed significantly to the pair’s decline later in the day’s session.
The currency pair’s future performance is likely to be affected by tomorrow’s US CPI and retail sales data among other macro releases.
The GBP/USD currency pair was trading at 1.3898 as at 16:26 GMT having rallied from a daily low of 1.3831. The GBP/JPY currency pair was trading at 149.42 having dropped from a daily high of 150.56.
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