The pound continued to march higher on Wednesday after hitting a one-year high against the dollar in the previous session as inflation data came in ahead of forecasts.
The stronger than expected UK inflation data boosted expectations for a more hawkish statement to come out of the Bank of England’s Thursday policy meeting.
Sterling was 0.2 per cent stronger at $1.3305, its highest level since September 13 2016. Against the euro, the pound was holding steady at £0.9003, its strongest level since early August 4.
Societe Generale said in a note:
Quickening UK inflation readings have the market convinced of a BoE rate hike within a year. The earnings growth data from the UK employment statistics today will be closely watched for confirmation of accelerating inflation pressures.
The slowing UK economy and “deadlocked” Brexit negotiations are likely to keep the BoE firmly on the sidelines. We expect sterling to resume its decline before long, as the macro data show further growth deceleration.