GBP/USD rises after weaker US retail sales and inflation data reduce expectations for a September Fed rate increase.
The British Pound strengthened above 1.3550 against the US Dollar in early European trading, driven by softer US economic data. US Retail Sales declined in July for the first time in nine months, while tame inflation and unexpected job losses bolstered bets against a Federal Reserve rate hike in September.
Markets now price a 31% chance of a Fed rate increase at the upcoming policy meeting, down from 35% following the retail sales report. UK employment and inflation data due later this week may further influence the Pound’s trajectory. Bank of England Chief Economist Huw Pill noted stronger-than-expected UK growth, reinforcing expectations for higher borrowing costs.
The shift in Fed rate hike expectations weighed on the US Dollar, supporting the GBP/USD pair’s upward movement.