Pound Steadies as UK Inflation Surprises, Trade Tensions Loom

The pound remained stable after UK inflation data exceeded forecasts in December, potentially influencing the Bank of England's interest rate decisions. Despite significant economic data, geopolitical tensions and fears of a US-Europe trade war dominate currency market activities, prompting investors to move away from US assets, favoring the pound.

The British pound held its ground on Wednesday, as newly released data revealed that UK inflation rose more than anticipated in December. This development could potentially reduce the likelihood of aggressive interest rate cuts by the Bank of England this year.

Meanwhile, geopolitical tensions have taken center stage in the currency markets. Concerns over a potential trade conflict between the United States and Europe have prompted investors to hedge their bets by selling off US assets, including the dollar, in favor of the pound.

Official statistics showed the UK's headline inflation rate increased to 3.4% in December, surpassing the forecasted 3.3% and up from 3.2% in November. Despite these figures, Sterling remained largely unchanged, trading at $1.3438 against the dollar and steady at 87.22 pence against the euro.

(With inputs from agencies.)