FX round-up: Sterling mixed on Wednesday after UK inflation supercharge ebbs

Sterling plugged away to achieve a mixed out-turn on major crosses Wednesday, but did manage to craft minor gains against both the US dollar and euro even as its inflation supercharge ebbed from Tuesday.

At about 17:15 GMT, sterling was up 0.03% to $1.2482, and up 0.03% to $1.1545. The dollar-spot index was down 0.2% to $99.613.

The British currency was also up on the loonie and aussie, but down modestly versus the kiwi, rand and yen.

Traders were already braced for Brexit-news induced volatility in sterling, more so after UK-EU divorce negotiations were triggered next week, the start of a two-year process.

"Yesterday's inflation-boost couldn't extend all the way into this Wednesday," said Spreadex financial analyst Connor Campbell.

"While that doesn’t completely eradicate the ground it gained after that huge jump in inflation was revealed, it does suggest a lack of appetite for taking it any higher," he said.

Inflation in February crashed though the Bank of England's 2% target for the first time in more than three years, increasing the pressure on officials to hike interest rates this year.

The UK consumer-price index jumped to 2.3% from 1.8% the month before, Office for National Statistics said. This was above the consensus estimate for a rise to 2.1%.

London Capital Group senior market analyst Jasper Lawler said the cable, while still clinging to gains, had slipped back due to profit-taking after touching $1.25.

"Sterling is consolidating gains made after above-forecast inflation was reported on Tuesday," he said in a note.

"Whether Sterling extends its decline could depend on retail sales data released on Thursday."

HL Currency Service senior analyst Chris Saint commented that, amongst the majors, only the safe-haven yen had outperformed sterling over the past couple of days.

He added that yen strength had coincided with a bout of investor nervousness, which has seen global stock markets slide on diminished confidence that US President Donald Trump can accomplish his ambitious fiscal stimulus plans.

Meanwhile, the dollar had a tough time throughout the session, being flat on the euro, up on the aussie and down against the loonie, kiwi, rand and yen.

"USD/JPY dropped below 111, a critical technical level which has held on three occasions since late November. While 100 offers round-number support, we suspect a bigger decline towards 109 and the 200 day-moving average," said Lawler in a statement.

He added that the euro had benefitted as polls showed Emmanuel Macron extending his lead in the first round of the French presidential elections to 26%, following a strong debate performance.

"Marine Le Pen on the other hand has seen support begin to wane as disenfranchised but more moderate voters gravitate towards Macron."