The British Pound catches second wind as soft PCE knocks Fed hike bets
The Pound Sterling registers solid gains versus the US Dollar on Wednesday, edges up 0.42% as the latest US inflation figures were below estimates, reaffirming NY Fed President Williams comments that they are in no rush to tighten monetary policy.
The British Pound experienced a resurgence on Wednesday, climbing 0.42% against the US Dollar. This rise came after US inflation figures fell short of expectations, lending credence to New York Fed President Williams' assertion that monetary tightening is not imminent. The GBP/USD pair reached a spot price of 1.3280, buoyed by robust UK economic growth figures.
In the previous day, several Federal Reserve officials released hawkish statements prior to the release of the Core Personal Consumption Expenditures (PCE) Price Index, which fell below estimates. While headline PCE was unchanged at 3.4% YoY, the broader figure was 3.4% YoY, both below forecasts. Economic growth in the US also proved stronger than anticipated, with the economy expanding 2.2% in the final quarter of 2025, surpassing expectations of 1.5%.
The US Dollar Index (DXY) declined 0.08% to 101.29 following the data release. In the UK, the Office for National Statistics (ONS) reported a Q2 GDP growth of 0.5% QoQ, surpassing the forecasted 0.4% and Q1 growth of 0.4%. Analysts are now focusing on the UK government's Autumn Budget and potential EU rejoin negotiations. Money markets predict a 33 basis point tightening by the Bank of England by year-end and over 100 basis points by the end of 2027.
GBP/USD is currently trading at 1.3278, holding below key moving averages and trend lines, with the Relative Strength Index indicating ongoing downward momentum.
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