Investors reduce Federal Reserve rate hike expectations after US inflation data aligns with forecasts, easing USD pressure.
The British Pound recovered early losses against the US Dollar, trading flat at 1.3495 in European trading. The rebound follows a decline in the US Dollar Index, which fell 0.1% to near 99.90, as markets dial back bets on Federal Reserve rate hikes.
Traders now see a 60% chance the Fed will hold rates steady in September, up from 30.4% a month ago. July US CPI data met expectations, with headline inflation at 3.4% year-over-year and core inflation at 2.5%, reducing pressure for immediate tightening.
Analysts noted underlying inflation remains above the Fed’s target but showed no broad-based acceleration, giving policymakers room to pause. The shift in sentiment weighed on the USD, supporting the GBP/USD pair.