Pound Sterling retains gains as US CPI trims September Fed hike odds
GBP/USD trades modestly higher on Wednesday as the US Dollar comes under mild pressure following the release of the latest US inflation figures. However, the market reaction remains limited as the data broadly matched expectations.
On Wednesday, the pound sterling held onto its gains against the US dollar as American inflation data suggested a potential decrease in the likelihood of a Federal Reserve rate hike at the upcoming September meeting. The US Dollar Index (DXY) experienced a slight decline, down 0.15% to 99.67. US Treasury yields followed the downward trend, with the two-year yield falling 4.6 basis points from the opening level of 4.220%.
Although the inflation data matched market expectations, traders remained cautious due to persistent upward pressure on inflation, driven by high energy prices. The probability of a rate increase at the September meeting decreased from 44% to 38%, according to the CME FedWatch Tool. Focus then shifted to preliminary UK second-quarter GDP data and the US Producer Price Index (PPI), both released on Thursday.
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