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GBP/USD edges higher near 1.3650 as Fed hike odds fade

The pair’s rise comes ahead of UK retail sales for July, where economists expect a 0.5% month on month decline.

Reported · Written up by our desk · Major Pairs

GBP/USD firmed to around 1.3645 in early Asian trading on Friday, with the US dollar easing against the British pound as expectations for additional Federal Reserve rate hikes faded, according to FXStreet.

FXStreet said weaker US economic data and uncertainty around Fed policy have added selling pressure to the greenback. Charu Chanana of Saxo also noted that higher Treasury yields may not support the dollar if traders view the move as reflecting fiscal risk, heavier government borrowing, or persistent inflation rather than stronger US growth or tighter monetary policy.

Markets are pricing a 64.0% chance the Fed will hold rates unchanged in September and a 36.0% chance of a hike, using the CME FedWatch Tool. In the UK, the Bank of England is expected to keep interest rates at 3.75% for the rest of the year, based on a Reuters poll.

Traders are looking to UK retail sales for July for further signals on the interest rate outlook. Economists project retail sales to fall 0.5% month on month in July versus a 1.0% decline in June, and FXStreet reported that a weaker outcome could weigh on Cable in the near term.

Latest closeGBP/USD 1.354 ▲0.3%

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