GBP/USD rallied on Monday, extending overnight gains to a 0.7% rise to 1.2030 by the NorAm session on headlines indicating Britain and the EU had reached a deal on trade with Northern Ireland that could open the way for sterling to test of 2023 highs near 1.24.

Prime Minister Rishi Sunak was expected to announce the deal on Monday after a meeting with European Commission President Ursula von der Leyen.
The pair are expected will hold a news conference at 1530 GMT.nL1N3570EU.

Despite the optimistic tone, sterling remains subject to inflation and rate uncertainties that could cap its gains.

Front-end rate U.S. and UK futures show markets expect U.S. rates to end 2023 above those in the UK -- at 5.24% versus 4.76% in Britain -- even though that would imply the BoE would be raising borrowing costs by 15bp more than the U.S. central bank from current levels.

Sterling traders will pay close attention to UK inflation on March 22 and the MPC rate announcement and vote March 23 for hints at the path of BoE rate policy.

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