Softer US producer and consumer prices reduce Fed rate hike expectations, lifting the British Pound against the US Dollar.
The GBP/USD pair climbed to near 1.3495 in early European trading Friday, supported by weaker-than-expected US inflation data. July’s US Producer Price Index (PPI) showed wholesale costs flat month-over-month, below the 0.2% consensus, while core PPI rose 0.2%, softer than the 0.3% forecast.
Annual headline PPI increased 4.7% year-over-year in July, with core PPI up 4.2%. The data followed a 0.1% decline in June and reinforced expectations the Federal Reserve may pause rate hikes. Markets now price a 34.8% chance of a September hike, down from 40% post-data.
Traders await US July Retail Sales figures later Friday, which could further influence Fed policy bets. Geopolitical risks, including Middle East tensions, may limit the pair’s upside by supporting the safe-haven USD.