GBP/USD refreshes annual high at 1.2830 as BoE prepares for further policy-tightening

The GBP/USD pair has printed a fresh annual high at 1.2830 in the early American session. The Cable has shown resilience as the Bank of England (BoE) is expected to raise interest rates further to sharpen its quantitative tools in the battle against United Kingdom’s stubborn inflation.

S&P500 futures have extended their upside move despite fears of a recession in the United States but have not eased even after a neutral interest rate decision by the Federal Reserve (Fed). The overall upbeat market mood is the outcome of a subdued appeal for the US Dollar Index (DXY).

Investors are showing back to the USD Index due to a relief rally inspired by a pause in the rate-hiking spell by the Fed. The investing community should understand that the Fed has skipped an interest rate hike for now and the policy-tightening spell is not concluded yet. Headline US inflation is twice the required inflation rate and core inflation is showing enormous persistence, which would keep the requirement of more interest rate hikes steady.

Meanwhile, the USD Index has attempted a recovery move after dropping to near 102.00 ahead of the United States Michigan Consumer Sentiment Index data.

The Pound Sterling is on the seventh cloud as discussions about a pause in the rate-hike regime by the BoE are far from over. BoE Governor Andrew Bailey is confident that inflation will soften but required time is expected to remain high as inflationary pressures are near 9% due to labor shortages and 45-year high food inflation.

Meanwhile, Reuters reported that the BoE looks set to raise interest rates by a quarter point to a 15-year high of 4.75% on June 22, its 13th straight rate rise as it fights unexpectedly sticky inflation that risks making it a global outlier. It further added investors this week expect that the UK central bank might hike rates as high as 6% this year