British Pound remains on the defensive as UK CPI meets expectations

The British Pound (GBP) faced pressure against the US Dollar (USD) following the release of UK Consumer Prices Index (CPI) data for August, which met expectations. Despite this, the GBP/USD pair declined to 1.3480 from its session high of 1.3500. Over the week, the Pound has lost 0.3% as investors await a potential Federal Reserve rate hike, while the Bank of England is expected to keep rates unchanged on Thursday.

UK consumer inflation rose to 0.5% in August, up from 0.3% in July, while the annual CPI climbed to 3.1% from 2.9%. Core CPI, which excludes volatile food and energy prices, grew at a steady 2.6% annual pace, in line with forecasts. Producer prices also exceeded expectations, with the Input PPI increasing to 6.1% year-over-year and Output PPI rising to 3.7% year-over-year.

The Bank of England's Monetary Policy Committee is expected to maintain its 3.75% benchmark rate. In contrast, the Federal Reserve is widely anticipated to increase rates by 25 basis points later in the day. The market is closely watching the Federal Reserve's projections, known as the dot plot, for indications of further rate hikes. Analysts predict a potential short-term weakness in the US Dollar following the Fed's decision.