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Sterling slips as sticky US inflation lifts Fed rate-hike expectations

GBP/USD fell below 1.3600 after Core PCE held steady at 3.3% YoY and the 10-year US Treasury yield rose to 4.664%.

Reported · Written up by our desk · Major Pairs

FXStreet reports sterling retreated, with GBP/USD slipping about 0.39% as the US dollar strengthened following a US inflation report that kept Federal Reserve rate-hike expectations elevated into the latter part of the year.

The US Core Personal Consumption Expenditures price index for July was in line with estimates and unchanged from June at 3.3% YoY, while the headline PCE rate held at 3.7% YoY, above expectations of 3.6%. The report also showed US economic growth of 1.5% at an annual pace in Q2 2026, and Durable Goods Orders rising to 1.1% MoM from 0.5% in June, exceeding forecasts.

After the data, the US Dollar Index was up 0.27% to 99.17, and US Treasury yields rose, with the 10-year benchmark edging up four basis points to 4.664%. Money markets, according to Prime Terminal, priced a 39% chance of a September hike, with December odds at a 74% chance for a 25-bps increase.

Investors then looked toward Fed Chair Kevin Warsh’s speech on Friday at the Jackson Hole Symposium, with additional US data such as Initial Jobless Claims and the University of Michigan Consumer Sentiment Index set to follow.

Latest closeGBP/USD 1.354 ▲0.3%|Dollar index 99.64 ▼0.3%

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