Sterling rose in European trade on Wednesday against a basket of major rivals, rebounding from a five-week trough following important UK data.
The data showed a surprise uptick in mainline inflation in the UK, boosting the case for maintaining interest rates unchanged for most of 2024.
GBP/USD
GBP/USD rose 0.1% to $1,2647 an ounce, with September 13 lows at $1,2597, after losing 0.75% on Tuesday, the third loss in a row as dollar purchases rallied following bullish remarks by Fed officials.
UK Inflation Data
UK consumer prices rose 4.0% y/y in December, above estimates of 3.8%.
Core prices rose 5.1% y/y, above estimates of 4.9% as same as November.
Such data showcases the persistent impact of inflationary pressures on UK policymakers, which hurt the odds for early UK interest rate cuts in the first half of next year.
UK Rates
There's less than a 30% chance of a Bank of England's interest rate cut at the March meeting according to market bets, and less than a 70% chance of such a cut in May.
Traders also reduced the expects UK interest rate cuts in 2024 from 134 to 119 basis points.
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