The British pound strengthened for a fourth consecutive day against the U.S. dollar in European trading Thursday, hovering near a three-year peak after UK inflation accelerated faster than expected. The Consumer Prices Index rose 3.8% year-on-year in April – the sharpest increase in 14 months – prompting markets to further scale back expectations of a Bank of England rate cut in June.
The inflation surprise has reinforced the divergence between UK and U.S. monetary policy outlooks, with traders now pricing just a 15% chance of BoE easing next month compared to nearly 50% probability for Federal Reserve action. The pound’s rally has been further supported by broad dollar weakness amid shifting Fed expectations, with GBP/USD testing key technical resistance levels.
Market focus now shifts to Friday’s UK Q1 GDP release, which could determine whether sterling extends its breakout or faces profit-taking. Economists forecast 0.4% quarterly growth following 0.6% expansion in Q4 2023. A stronger-than-expected reading may push cable toward the psychologically important 1.4000 level, while disappointment could see a pullback toward support at 1.3700. Technical indicators show the pair approaching overbought territory, suggesting potential near-term consolidation.
Related topics：
