GBP/USD touches a high of 1.4223 on the day
That's the highest since 2 February, as the pair looks to be on a climb to test the year's highs once again.
The previous move stalled at the 76.4 retracement level @ 1.4268 and the high posted at the time was on 25 January @ 1.4345. At the rate the dollar is weakening and with sterling gaining as the market continues to anticipate a BOE rate hike in May, we may very well test said levels by end of this week.
The risk for sterling is that if the currency strengthens too much on a trade-weighted basis then inflation starts to fall under 2% - which would then give the BOE some inflexibility in raising rates higher. The money market is pricing in about 45% of two rate hikes this year, and that sort of expectation can quickly fade if the stress of higher rates also start to weigh on household debt/consumer credit.
