Most major currencies have traded within relatively narrow ranges versus the dollar in the past couple of trading sessions, as the scorching move higher in US yields pauses for breath and investors patiently await next week’s FOMC meeting.

The pound rose to its strongest position versus the common currency since February 2020 on Wednesday after data showed that UK inflation jumped to its fastest pace in 30 years in December.

Most currencies lost ground against the resurgent dollar on Tuesday, with a sharp move higher in US yields providing solid incentive for investors to unwind last week’s bearish greenback bets.

The US dollar regained a portion of its recent losses as markets opened for the week on Monday, with the dollar index up around half a percent on last week’s two month lows.

The dollar is struggling so far in 2022 even as US Treasury yields surge higher and the market prices in a faster hiking cycle from the Federal Reserve.

Louise joins Ebury from HSBC where she was the Head of Innovation, Delivery and Capability Development.

A spike in US bond yields failed to support the dollar, while sterling outperformed its peers as markets bet on a rapid pace of rate hikes from the Bank of England.

The Federal Reserve made it clear that it is increasingly concerned about inflationary pressures at its December meeting, and the dollar reacted accordingly.

Thursday’s announcement from the ECB indicated a significant adjustment to asset purchases, as expected. More surprising were hawkish signals from the central bank that pushed the EUR/USD to the strongest level in about two weeks.