The British pound gained momentum against other major currencies in early Wednesday trading after the UK released inflation data for April. Meanwhile, the US dollar continued to weaken amid trade uncertainties and political challenges. With no major economic data expected midweek, investors remain focused on geopolitical developments and central bank commentary.
UK Inflation Surpasses Expectations
The UK’s Office for National Statistics (ONS) reported that the Consumer Price Index (CPI) rose 3.5% year-on-year in April, up from 2.6% in March and exceeding market expectations of 3.3%. Month-on-month, CPI increased by 1.2%, a notable rise from the previous 0.3%. Core CPI, which excludes volatile food and energy prices, rose 3.8% year-on-year, beating forecasts of 3.6%.
This stronger-than-expected inflation data has driven bullish momentum in GBP/USD, pushing the pair above 1.3450 — its highest level since February 2022.
US Dollar Faces Pressure From Multiple Fronts
China’s Ministry of Commerce criticized recent US restrictions on China’s advanced chip industry, calling them “typical unilateral bullying and protectionism.” The Chinese government accused the US of misusing export controls to unfairly suppress China, violating international laws.
In the US, a Congressional Budget Office (CBO) analysis highlighted challenges for House Republicans in passing President Donald Trump’s tax bill. The bill could add approximately $3.8 trillion to the national debt, raising fiscal concerns.
The US dollar index traded near 99.50 on Wednesday, down roughly 0.5% for the day. US stock index futures also declined between 0.4% and 0.6%, following a drop in Wall Street’s major indexes on Tuesday.
Other Market Highlights
EUR/USD continued its weekly gains, reaching towards 1.1350 during early European trading. The European Central Bank (ECB) is scheduled to release its Financial Stability Assessment Report later today.
USD/JPY fell to 143.50 amid Japanese trade data showing exports rose 2% year-on-year in April, matching expectations, while imports dropped 2.2%.
Gold benefited from risk-off sentiment and gained nearly 2% on Tuesday. Gold/USD maintained its bullish streak, easily breaking above the $3,300 level and rising about 1% on Wednesday.
USD/CAD continued to slide, closing the first two days of the week in the red and currently trading below 1.3900. This follows Statistics Canada’s report showing annual CPI inflation dropped to 1.7% in April from 2.3% in March.
Outlook
With no major economic releases scheduled midweek, market participants are likely to keep a close eye on geopolitical tensions, central bank remarks, and fiscal developments. The British pound looks set to remain supported by strong domestic inflation data, while the US dollar may face ongoing pressure from political and trade uncertainties.
Related topics:
