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Pound rebounds versus dollar as Fed hike odds cool

GBP/USD held near 1.3495, while traders increased odds of the Fed holding rates steady in September to about 60% from 30.4% a month ago.

Reported · Written up by our desk · Major Pairs

The British pound rebounded against the US dollar and moved back to around 1.3495 during European trading on Thursday, with GBP/USD trimming early losses as the greenback faced pressure.

FXStreet reported the move came as investors leaned toward easing fears of near term Federal Reserve rate hikes, with concern shifting toward downside risks in the labor market rather than ongoing tensions tied to the Middle East. The US Dollar Index, which tracks the dollar versus six major currencies, was last down about 0.1% near 99.90.

Markets also repriced Fed expectations, with CME FedWatch showing the probability of the Fed holding policy rates steady in September rising to almost 60% from 30.4% a month earlier. Analysts cited by FXStreet pointed to July inflation data that was broadly in line with expectations, leaving policymakers more room to keep rates on hold.

Attention then turned to the next US data release, with investors focused on July producer price index figures expected to cool, and the pound additionally supported by stronger UK growth data earlier in the day. FXStreet noted that UK Q2 GDP attracted bids after June GDP printed 0.3% month over month, driven by services growth of 0.4% month over month.

Latest closeGBP/USD 1.349 ▼0.1%|Dollar index 99.99 ▲0.2%

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