GBP/USD prints fresh highs on BoE expectations

• GBP/USD bulls stampede on BoE rate expectations.
• US dollar drifts lower following yesterday's spike to fresh cycle highs.  

At 1.3490, GBP/USD is trading near to the highs of the day that came in just shy of 1.3495. The pair has moved from a low of 1.3396 and climbed to a one-week high after data showed UK inflation surged to a 10-year high last month.

The pound is firmer across the board due to the expectations of an interest rate hike as early as next month following a week, so far, of better than expected data. On Tuesday, for instance, UK data showed Britain's job market withstood the end of the government's furlough scheme.

Subsequently, the Bank of England is expected to join the Reserve Bank of New Zealand as one of the first major central banks to raise rates since the coronavirus pandemic hit the global economy. The markets are now pricing a 60% chance that the BoE will raise rates at a Dec. 16 meeting.

US dollar drifts below 16-month highs

Meanwhile, the US dollar has drifted lower from a new 16-month high that was printed on Tuesday as markets position for rate increases from the Federal Reserve that is now seen hiking rates by as early as mid-2022. The dollar index, DXY, which measures the currency against a basket of six rivals, is down around 0.13% at the time of writing, trading at 95.788 within the day's range of between 95.734 and 96.241. Yesterday's high was 96.266, the best level marked since mid-July 2020.