• The Pound Sterling recovers above 1.2400 against the US Dollar as UK inflation came in higher than expected in March.
• UK’s annual headline and core CPI grew by 3.2% and 4.2% in March, respectively.
• Fed Powell’s hawkish guidance on interest rates has strengthened the US Dollar’s appeal.

The Pound Sterling (GBP) rebounds strongly in Wednesday’s London session as the United Kingdom Office for National Statistics (ONS) reported that the Consumer Price Index (CPI) for March grew more than what economists had expected. Despite beating estimates, inflation has softened from February, suggesting that higher interest rates by the Bank of England (BoE) contribute to abate price pressures. 

Meanwhile, producer price inflation has also slowed, indicating prices of goods and services at factory gates are easing. Business owners generally slash their prices when they expect demand to remain subdued.

Slightly hot inflation figures could put into question expectations that the BoE will cut rates in August, although Tuesday’s employment data suggested that the UK’s job market is cooling. The labor market report showed that the Unemployment Rate rose sharply to 4.2% in three months ending February from expectations of 4.0% and the prior release of 3.9%. The number of employed people fell by 156K in the three months to February, more than the 89K jobs lost in the quarter to January.