The Pound reached a new one-month top against the Euro and edged up against a weaker Dollar on Wednesday as UK inflation data indicated less monetary easing by the Bank of England (BoE).
UK consumer price inflation slowed by less than forecast to a two-and-a-half-year low of 3.2% in March in annual terms, a fall from a 3.4% rise in February.
The Dollar declined but remained close to its five and a half-month high as officials at the Federal Reserve repeated US rates will likely remain higher for longer
At the time of writing, the Pound was up 0.35% against the Dollar at $1.24; and rose 0.16% to 85.30 pence per Euro after reaching its highest level since mid-March at 85.21 pence.
"While both the main and core measures of inflation eased to their lowest levels since late 2021, the continued stickiness in services inflation, in particular, may elicit a cautious approach among Monetary Policy Committee members," stated the head of market strategy at Ebury, Matthew Ryan.
"We still see a realistic possibility of looser policy in the summer, although today's data has somewhat put a spanner in the works," he continued.
In Q1, due to a competitive job market and trade disruption caused by energy price fluctuations, analysts predicted that the Bank of England would probably lower interest rates after the European Central Bank and the Federal Reserve.
Yet this has altered over the past few weeks.
Markets have now fully priced in a first move by the Bank of England in September; in June for the European Central Bank; and in Q4 for the Fed, Reuters reports.
Experts indicated that the prevailing opinion leaned towards expecting less severe interest rate reductions from the Bank of England compared to those anticipated from the European Central Bank over a six-month period.
"Additionally, the poor state of public finances suggests little room for manoeuvre for the new Chancellor. The latter implies that the election could be a reassuringly boring event for markets," stated Jane Foley, forex strategist at Rabobank.
Indeed, a recent projection suggests that the Conservatives are poised for a significant loss in an upcoming national election anticipated later this year. The projection, released earlier this month, indicates that the Labour Party is likely to secure over 400 seats, signalling a substantial victory.