- GBP / USD bulls are stampeded by Bank of England rate expectations.
- The US dollar is moving lower after yesterday’s rally to new cycle highs.
The GBP/USD it is trading near the highs of the day that were just below 1.3495. The pair has moved from a low of 1.3396 and rose to a one-week high after data showed UK inflation rose to a 10-year high last month.
The pound is firmer across the board on expectations of an interest rate hike next month after a week so far of better-than-expected data. On Tuesday, for example, data from the UK showed that the British labor market weathered the end of the government’s leave scheme.
Subsequently, the Bank of England is expected to join the Reserve Bank of New Zealand as one of the first major central banks to raise rates since the coronavirus pandemic hit the world economy. Markets are now pricing in a 60% chance that the Bank of England will raise rates at a December 16 meeting.
US dollar falls below 16-month highs
Meanwhile, the US dollar has fallen from a new 16-month high that it touched on Tuesday as the markets position for the Federal Reserve rate hikes that is now seen increasing rates in mid-2022. The dollar index, DXY, which measures the coin against a basket of six rivals, is down around 0.13% at the time of writing, trading at 95,788 within the range of the day between 95,734 and 96,241. Yesterday’s high was 96,266, the best level since mid-July 2020.
Technical levels
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