Anna 
In a robust comeback, the Sterling (GBP) demonstrated considerable strength following the release of unexpectedly steadfast UK Consumer Price Inflation (CPI) data for December. GBP/USD successfully recouped all previous losses, driven by mounting inflationary pressures and fading expectations of an imminent interest rate cut by the Bank of England (BOE). The UK economy’s CPI displayed resilience, maintaining its strength despite elevated oil prices due to the Russo-Ukrainian conflict and a marginal uptick in services sector inflation.
The less-than-anticipated inflationary report affords BOE policymakers greater flexibility to prolong the maintenance of interest rates at a higher level, currently set at 5.25%. Policymakers at the Bank of England have consistently cautioned against premature discussions about unwinding the elevated interest rates, emphasizing persistent price pressures exceeding the target 2% rate.
Despite the sterling’s significant recovery, market sentiment remains cautiously optimistic. Investor uncertainty prevails, particularly regarding the Federal Reserve’s timeline for potential interest rate adjustments. Looking ahead, the focal point for market participants will be the eagerly awaited U.S. retail sales data for December, scheduled for release at 13:30 GMT. The outcome of this economic indicator will play a crucial role in shaping future market dynamics.
