British Pound gathers strength to near 1.3550 as Fed hike bets fade, UK jobs data loom

The British Pound (GBP) gained strength to nearly 1.3550 against the US Dollar (USD) on Tuesday morning, as traders reduced expectations of a U.S. Federal Reserve (Fed) rate hike following weaker US inflation data. The UK's employment report will be closely watched later in the week, as it may provide insights into the Bank of England (BoE) interest rate trajectory.

Recent weaker-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) data have tempered US rate hike predictions, with only a 35% chance of a September increase and a 69% chance of a hike by December, according to the CME FedWatch tool. Bank of England Chief Economist Huw Pill had previously noted that stronger-than-expected UK economic growth readings supported the case for higher borrowing costs to curb inflation.

Traders will closely monitor UK jobs and inflation data this week, which could hint at the BoE's interest rate future. The UK's Unemployment Rate is expected to decline to 4.8% in June from 4.9% in May, potentially boosting the GBP against the USD. Market strategists caution that investors may tread carefully around the Pound as it nears recent highs against the USD, as multiple data releases are expected.

The daily GBP/USD chart shows a bullish bias, trading above the 100-day simple moving average (SMA) and the Bollinger middle band, with the pair approaching the Bollinger upper band. A break above this band could lead to further gains, while failing to do so may result in consolidation or a pullback towards the mid-1.34 support zone.