Sterling rallied by more than half a percentage point against the US dollar ahead of the release of the inflation figures, as traders anticipated CPI rising above the Bank of England’s two per cent target.
The pound rose to highs of $1.2426 against the US dollar, after dipping yesterday below $1.235.
Sterling weakened yesterday as Downing Street confirmed the date for Article 50 to be triggered as 29 March.
The trade-weighted dollar index came under sustained pressure from the euro, as the single currency rose to its highest point since the start of February.
The euro rose to highs of $1.0804 after the first French Presidential election debate, its highest point since 2 February.
Centrist independent Emmanuel Macron has risen since the start of the year to be favourite to win the Presidential race. While some commentators were not impressed with Macron’s performance, he may have done enough to reassure markets.
Emily Nicol, an economist at Daiwa Capital Markets, said: “While it is too soon to judge whether or not the debate made any difference, a snap poll conducted by Elabe towards the end of the debate suggested that the independent centrist Macron might well have come out on top.”
Macron is seen as the main obstacle to the Presidency for far-right National Front leader Marine Le Pen. Le Pen is widely expected to make it into the final round of voting for the Presidency, but is predicted to lose in the run-off vote.
David Morrison, senior market strategist at Spread Co, said: “Marine Le Pen’s main opponents acquitted themselves well, reducing the possibility of the Euro-sceptic candidate ultimately prevailing.”