Sterling rose in European trade on Tuesday against a basket of major rivals, extending gains for the second day against the dollar and hitting a one-week high amid positive outlook.
Markets expect Bank of England to maintain interest rates high for most of 2024 following the surprise increase in UK inflation in December,
Many analysts now expect BOE to hold onto tight policies for longer than the Federal Reserve or the ECB, in turn boosting the pound.
GBP/USD
GBP/USD rose 0.3% to 1.2747. the highest in a week, with a session-low at 1.2705, after rising 0.1% on Monday, resuming gains following disappointing UK retail sales data.
Positive Sentiment
Markets are dominated by positive sentiment with Wall Street hitting fresh record highers as investors await the first Fed rate cuts this year.
The pound is gaining ground against both the euro and the dollar, shaking off recent weakness following weak retail sales data on Friday.
BOE
Markets used to expect an early rate cut by the Bank of England in March, but a string of strong data, especially consumer prices, hurt such odds.S
Several banks now project a later BOE rate cut than expected, especially compared to the Fed and ECB, underscoring the pound against main rivals.
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