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GBP/USD holds near July highs after softer US CPI trims rate-hike odds

GBP/USD was around 1.3523 near its July 16 peak, while CME FedWatch showed September hike odds falling to 38% from 44% after the inflation data.

Reported · Written up by our desk · Major Pairs

GBP/USD edged modestly higher on Wednesday as the US dollar weakened slightly after the latest US inflation report, with the pair trading around 1.3523, near its highest level since July 16, according to FXStreet.

The US CPI rose 0.1% in July after a 0.4% decline in June, while the annual rate cooled to 3.4% from 3.5%. Core CPI increased 0.2% month over month following a flat June reading, and the yearly core rate slowed to 2.5% from 2.6%, FXStreet said.

FXStreet reported that the reaction was muted because the data was broadly in line with expectations, leaving traders focused on the idea that inflation risks remain skewed to the upside due to elevated energy prices. The US Dollar Index was around 99.67, down 0.15% on the day, and Treasury yields moved lower, with the two-year yield down 4.6 basis points from the daily open to 4.220%.

Even with yields lower, the market still expects the Federal Reserve to keep a restrictive stance until inflation shows clearer progress toward its 2% target, FXStreet added. The probability of a September rate hike dropped to 38% from 44% before the data, and traders are now set to watch the UK’s preliminary second-quarter GDP and the US Producer Price Index due Thursday for fresh direction.

Latest closeGBP/USD 1.351 ▲0.1%|Dollar index 99.81 ▲0.0%

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