GBP/USD bulls move to the highs as Powell testifies

• GBP/USD moves higher as the dollar moves to the lows of the day.
• Fed's Powell testifies but US dollar fails to move higher on his ''transitory'' comments. 

GBP/USD is currently trading at 1.3941 and turning bid on the session as the markets sell US dollars sending the greenback to the lows of the day so far. 

At the time of writing, GBP/USD has traded to a high of 1.3947 from a low of 1.3860. 

At the start of the European session, sterling fell against a slightly stronger dollar as traders prepared for more hawkish rhetoric from the Federal Reserve's chair, Jerome Powell, who is currently testifying to Congress.

The Fed surprised the market last week which set off forex volatility when the central bank signalled that it would raise interest rates and end emergency bond-buying sooner than expected.

This sent the pound to a two-month low of $1.37865 early on Monday.

Powell, so far, has stated that inflation factors will wane over time which could add some fuel to the US dollar over the coming sessions. 

Meanwhile, analysts expect no changes to policy after the Bank of England. The central bank announces its latest decision at 12:00 BST on Thursday 24 June. 

A more optimistic economic assessment from the Bank of England could push sterling back towards 1.4000. and beyond a 50% mean reversion of the last bearish daily impulse.

Meanwhile, UK inflation hit its highest in nearly two years which has sparked a debate on whether the Bank of England will hike rates in 2022, ahead of the Fed.  

Moreover, British manufacturers expect to raise their prices at the fastest pace in nearly 40 years, according to a survey which adds to signs of growing inflation pressures.

This supports a bullish trajectory as it has brought forward bets that the BoE would raise interest rates sooner than first imagined, even by normally dovish committee members, such as Gertjan Vlieghe, who is floating the possibility of a hike later into 2022.

Currency markets are fully pricing in a 30 basis point hike in rates by the BoE by December 2022.

However, MPC members look set to remain divided over whether to pull the plug on their 875 billion-pound ($1.2 trillion) government bond purchase programme.

As for Brexit risks, so far the dispute between the European Union and Britain over post-Brexit trading arrangements in Northern Ireland continued to have limited impact on the pound.