Rising US inflation reinforces Fed rate hike bets, lifting the USD and pressuring GBP/USD below 1.3550 amid UK political turmoil.
The GBP/USD pair remains under pressure near a two-week low, trading below 1.3550 during the Asian session as the USD consolidates gains. US inflation data released Tuesday showed the Consumer Price Index (CPI) rose 3.8% year-on-year in April, the highest since May 2023, while core CPI climbed 0.4% month-on-month and 2.8% annually.
The hotter-than-expected inflation print has increased expectations for a Federal Reserve rate hike, with markets pricing in a 35% chance of a 25-basis-point increase by December 2026. Meanwhile, the British Pound faces headwinds from a deepening UK political crisis, as over 80 Labour MPs demand Prime Minister Keir Starmer’s resignation following poor local election results.
The USD’s strength, fueled by inflation concerns and fading hopes for a US-Iran peace deal, contrasts with GBP weakness, leaving the pair vulnerable to further declines.