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British pound rises versus dollar after US CPI cools
July Fed rate hike odds dropped to 16% from 40% after CPI, while core inflation also missed forecasts.
The British pound strengthened against the US dollar after US inflation data came in weaker than expected, which cooled near term expectations for a Federal Reserve rate hike, FXStreet reported.
GBP/USD was around 1.3415, up nearly 0.5% on the day and near a one month high, following a June CPI decline of 0.4% month over month after a 0.5% rise in May.
US headline inflation slowed to 3.5% year over year from 4.2%, below the 3.8% forecast, while core CPI was flat on a monthly basis versus expectations for a 0.2% increase; the annual core rate eased to 2.6% from 2.9%, below the 2.8% estimate.
Traders scaled back Fed hike bets, with the CME FedWatch Tool showing the probability of a July increase fell to 16% from 40%, and the September odds eased to 60% from 74%, as softer inflation was linked largely to lower energy prices tied to an earlier US Iran interim peace deal.
FXStreet added that the decline could be temporary given rising geopolitical tensions and higher oil prices, and investors are now watching Fed Chair Kevin Warsh’s congressional testimony and speeches from Fed officials Michael Barr, Austan Goolsbee and Lisa Cook.
Latest closeGBP/USD 1.335 ▼0.5%