Forex Today: Pound Sterling rises on hot UK inflation, US Dollar extends slide

Here is what you need to know on Wednesday, May 21:

Pound Sterling (GBP) gathers strength against its rivals early Wednesday following the release of April inflation data from the UK, while the US Dollar (USD) continues to weaken on trade uncertainty and political woes. The economic calendar will not feature high-tier data releases midweek, allowing investors to remain focused on geopolitics and comments from central bankers.

The UK's Office for National Statistics (ONS) reported in the European morning that annual inflation in the UK, as measured by the change in the Consumer Price Index, climbed to 3.5% in April from 2.6% in March. This reading came in above the market expectation of 3.3%. On a monthly basis, the CPI rose by 1.2% after increasing by 0.3% previously. Finally, the core CPI, which excludes volatile food and energy prices, increased by 3.8% on a yearly basis, surpassing analysts' estimate of 3.6%. GBP/USD gathered bullish momentum after hot UK inflation data and advanced to its highest level since February 2022 above 1.3450.

China's Commerce Ministry said early Wednesday that the US' measures on China's advanced chips are "typical of unilateral bullying and protectionism," adding that the US violates international law by abusing export controls to contain and suppress China. Meanwhile, House Republicans are struggling to pass President Donald Trump's tax bill, which could add roughly $3.8 trillion to the national debt, according to an analysis released Tuesday by the Congressional Budget Office (CBO). The USD Index stays under bearish pressure on Wednesday and trades near 99.50, losing about 0.5% on the day, while US stock index futures fall between 0.4% and 0.6% after Wall Street's main indexes closed in negative territory on Tuesday.

EUR/USD builds on its weekly gains and rises toward 1.1350 in the early European session. The European Central Bank (ECB) will publish its Financial Stability Review later in the day.

The data from Japan showed in the early Asian session that Exports rose by 2% on a yearly basis in April, as expected. In the same period, Imports declined by 2.2%. USD/JPY stays on the back foot on Wednesday and declines toward 143.50.

Gold benefited from the risk-averse market atmosphere and gained nearly 2% on Tuesday. XAU/USD preserves its bullish momentum and trades comfortably above $3,300, rising about 1% on the day.

USD/CAD continues to stretch lower and trades below 1.3900 after closing the first two days of the week in the red. Statistics Canada reported on Tuesday that the annual CPI inflation softened to 1.7% in April from 2.3% in March.