British Pound retreats as sticky PCE revives Fed hike bets
Sterling retreats some 0.39% as the US Dollar stages a recovery after a US inflation report revealed that prices remained elevated, increasing the chances of seeing a rate hike by the Federal Reserve (Fed) towards the end of the year.
The British Pound experienced a decline as elevated inflation rates fueled speculation of potential Federal Reserve rate hikes. The GBP/USD exchange rate dropped below 1.3600 following a US inflation report indicating persistent price increases. Core PCE Price Index data for July remained consistent with forecasts and remained unchanged from June's 3.3% year-over-year growth.
Headline PCE steadied at 3.7% year-over-year, surpassing estimates of 3.6%. The US economy expanded by 1.5% annually in Q2 2026, as predicted, while durable goods orders doubled from June's 0.5% to 1.1% month-over-month, beating expectations. The US Dollar Index rose 0.27% to 99.17, and US Treasury yields increased by four basis points to 4.664%.
Market sentiment shifted, with investors heightening their expectations of a Fed rate increase later in the year. The upcoming Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium will be closely watched. In the UK, the economic calendar was light on Wednesday, but GBP/USD was influenced by global developments, market sentiment, and US market dynamics.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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