GBP Rallies as CPI Surpasses BoE Target

The pound rose to the highest in three weeks and gilts fell as U.K. inflation accelerated more than forecast to break through the Bank of England’s target for the first time since 2013.

The data showing annual inflation picked up to 2.3 percent in February, versus a median estimate of 2.1 percent in a Bloomberg survey of economists, underlined bets by investors that the BOE will tighten policy as early as next year. Market rates are now fully pricing a 25-basis-point rate rise by August 2018, compared with a 67 percent chance priced on Monday.

Sterling rallied as much as 0.9 percent to $1.2471, the highest since Feb. 27. Ten-year gilts dropped with yields rising six basis points to 1.29 percent, the highest in more than a month.

Bloomberg

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.