British Pound strengthens to near 1.3500 as Fed rate hike bets ease

The British Pound strengthened to nearly 1.3500 against the US Dollar as speculation of further Federal Reserve rate hikes eased. Traders noted that cooler-than-anticipated US consumer and producer price data reduced the Federal Reserve's ability to raise interest rates. The US July Retail Sales report awaited later on Friday. US wholesale goods costs remained flat in July, lower than expected.

Core Producer Price Index (PPI) rose less than forecast. Traders lowered the odds of a September Fed rate hike to 34.8%, down from 40% after PPI data. Geopolitical tensions in the Middle East might benefit the US Dollar, posing a challenge to the Pound. The UK economy's growth in the second quarter of 2026 matched forecasts at 0.4%.

Despite this, Bank of England economists believe interest rates could rise further to curb inflation. They emphasize that UK economic activity data has withstood the external shock so far. Technical analysis indicates a bullish outlook for GBP/USD, with the pair above key moving averages. The Pound Sterling, the oldest currency globally, is the fourth most traded in foreign exchange markets, accounting for 12% of daily transactions.

Its value is primarily influenced by the Bank of England's monetary policy decisions aimed at maintaining price stability.