Sterling rose in European trade on Wednesday on track for the third straight profit against the dollar, hitting a three-week high amid a positive sentiment in UK markets after the government reset relations with the EU.
The UK economy grew by the fastest pace in a year during the first quarter, and recent deals with the US and Europe will likely bolster this growth even further in upcoming quarters.
The developments pressure the Bank of England’s policymakers even further and hurt the odds of a UK rate cut in June, with traders now awaiting important UK inflation data for April later today to gather more clues.
The Price
The GBP/USD rose 0.35% today to $1.3436, an April 19 high, with a session-low at $1.3383.
The pound rose 0.25% on Tuesday, the second profit in a row amid heavy selling pressure.
US Dollar
The dollar index fell 0.4% on Wednesday, plumbing two-week lows against a basket of major rivals.
US President Donald Trump has failed to convince Republicans to pass his tax cuts proposal, while investors are growing cautious from potential attempts by US officials to weaken the dollar during a ministerial meeting for the G7 in Canada.
UK Rates
The UK economy grew 0.7% in the first quarter, the best in a year, beating estimates of a 0.6% rise, and up from a 0.1% rise in the last quarter of 2024.
Following the data, the odds of a UK rate cut in June fell from 30% to 25%.
The UK and the EU reached an agreement to reset ties earlier this week following Britain’s raucous exit in 2020.
Otherwise, the last vote by the Bank of England on monetary policies earlier this month showed a clear division on the path ahead for monetary easing.
UK Inflation
Later today, UK inflation data will be released, with consumer prices expected up 3.3% y/y in April, up from a 2.6% rise in March, while core prices are expected up 3.6%.
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