July PCE inflation holds at 3.7% year-over-year, reinforcing Fed rate hike expectations and lifting the USD against the pound.
The British pound fell to a one-week low against the US dollar, trading at 1.3675, as stronger-than-expected US inflation data bolstered the greenback. GBP/USD dropped over 0.5% from Wednesday’s highs, extending losses for a second day.
US Personal Consumption Expenditures (PCE) Price Index data showed annual inflation steady at 3.7% in July, defying expectations of a slight decline. Core PCE inflation also held at 3.3%, well above the Federal Reserve’s 2% target. Markets now await clearer signals from the Fed ahead of its September meeting.
Fed rate hike bets for September remain at 36%, unchanged despite the hot inflation print. Analysts note the data offers mixed signals, leaving September Fed policy expectations largely intact but keeping dollar strength in focus.