Sterling has moved higher this morning as positive risk sentiment and higher UK inflation data makes the Pound more attractive to investors.
UK inflation figures came in at 1.4% year on year, slightly above the expected 1.3%. These levels are rather subdued but indicate that prices are rising, which may reduce the urgency of the Bank of England to further ease monetary policy. The Pound caught a bid following the release of these figures which tipped the GBP/EUR above a key technical resistance level which in turn has helped push the GBP/USD to a fresh high.
Optimism over the UK’s rollout of the Covid-19 vaccine and lowering case numbers have also given investors an underlying reason to buy the Pound, with today's move creating the impression that larger investors are correcting their positioning on Sterling. The GBP/USD is currently trading around an important area of resistance and, from a technical perspective, a clean break higher could potentially open it up to stronger levels, although the market might need more evidence before having the legs to do so.
As a result, the GBP/EUR has hit the highest levels since May last year and the GBP/USD has reached the strongest rate seen since May 2018.