High inflation and growing expectations for further rate hikes keep pound supported

Cable edged lower in European trading on Tuesday, after attempts at pivotal barrier at 1.2343 (Mar 23 high) stalled just under the target but keeps overall firm bullish stance.

The latest inflation data and comments from BOE Governor Bailey fuel expectations for further rate hikes, which underpins the pound.

Governor Bailey highlighted that fighting inflation remains the key job for BOE policymakers and recent rising worries about the health of global banking system should not obstruct their primary task.

The latest data showed that soaring food prices pushed inflation in British shops to the highest in nearly two decades, with comments Britain’s Retail Consortium that shop price inflation has yet to peak, adding to growing expectations that the BOE would for for the twelfth consecutive rate hike in May.

This creates positive environment for pound, which is already in near-term uptrend, as bulls challenge 1.2343 pivot, the last obstacle on the way towards key barrier at 1.2447 (peaks of Dec 2022 / Jan 2023) which also mark the ceiling of larger range.

Bullish daily studies offer additional support, with potential deeper dips expected to stay above solid support at 1.2185 (daily Tenkan-sen) to keep bulls intact.

Res: 1.2330; 1.2343; 1.2402; 1.2446
Sup: 1.2270; 1.2217; 1.2185; 1.2154