GBP/USD: Sterling Cranks Up to 3-Year High as UK Inflation Surges to 3.5% in April

British currency was quick to reverse those gains but inflation did soar in April — up 3.5% against 3.3% expected — as household bills mounted.

🔥 Sterling Pops to Three-Year Peak

• The GBPUSD shot up to a three-year high of $1.3470 on Wednesday after the UK released a hotter-than-expected inflation report. In April, consumer prices surged 3.5%, above the 3.3% penciled in by analysts, fueled by a surprise rise in household bills.
• Water, gas and electricity were all more expensive starting April 1, throwing a curveball to households who were just getting used to cooling inflation — 2.8% in February and 2.6% in March.

💪 Solid 11% Jump Since 2024 Lows

• The excitement in sterling bulls didn’t last long. The currency quickly reversed those gains as traders couldn’t sustain the intensity of the move and let it slip — the sterling was back near the $1.34 handle later in the session.
• Despite the pullback, the pound is still in bull mode, looking to string together three straight days of gains. Since its lowest point of 2024 — $1.2099 in November — the pound-dollar has added a whopping 11% to trade at current market prices.

🧐 Bank of England and Interest Rates

• Core inflation — which strips out food, alcohol, tobacco, and energy — also reaccelerated, climbing to 3.8% from 3.4% in March. That’s a red flag for the Bank of England, which has been hoping for a clean path to easing monetary policy.
• Previously, the Bank of England had said that it’s closely monitoring the pace of inflation. That said, officials are ready to tweak interest rates to the downside once inflation figures start getting closer to the central bank’s goal of 2%.