GBP/USD rallies as UK inflation holds steady at 3.8%

GBP/USD climbed 0.4% to 1.3185 after UK inflation remained unchanged at 3.8% year-over-year, exceeding market expectations of a decline to 3.6%. Core inflation also proved sticky at 4.5%, suggesting the Bank of England faces a challenging decision at its upcoming meeting. The pound strengthened against major peers, with EUR/GBP falling to 0.8430 and GBP/JPY advancing to 185.50. The inflation persistence raises questions about the BoE's ability to ease monetary policy, contrasting with expectations for Fed and ECB rate cuts. Services inflation remained elevated at 5.2%, well above the BoE's comfort zone. Technical analysis shows GBP/USD breaking above the 1.3150 resistance, with the next target at 1.3230. The data suggests the BoE may maintain its hawkish stance longer than other major central banks, potentially supporting sterling strength. Traders should monitor upcoming BoE communications for policy guidance amid this inflation stickiness.