- GBP/USD edges lower to around 1.3500 in Tuesday’s early European session.
- Markets predict just one Fed rate cut this year.
- The upbeat UK Q2 GDP report could complicate the BoE rate cut path.
The GBP/USD pair trades on a softer note near 1.3500 during the early European session on Tuesday. The US Dollar (USD) posts modest gains against the Pound Sterling (GBP) as traders pared bets on a rate cut at the US Federal Reserve (Fed) September 16-17 meeting. The UK July Consumer Price Index (CPI) inflation report will take center stage later on Wednesday.
A report last week showed that the US Producer Price Index (PPI) increased by the most in three years in July amid a surge in the costs of goods and services. This, in turn, prompted traders to reduce expectations of rate reduction, supporting the Greenback. The Fed is expected to cut interest rates in September and once more this year, according to most economists from the Reuters poll.
Traders brace for the Fed’s annual Jackson Hole conference later on Friday for fresh impetus. However, renewed concerns over the Fed’s independence from political interference could drag the USD lower and act as a tailwind for the major pair.
On the GBP’s front, the upbeat UK Gross Domestic Product (GDP) report for the second quarter (Q2) could complicate the Bank of England’s (BoE) path to cutting interest rates further and might help limit the GBP’s losses. The UK GDP slowed to 0.3% in the three months to June, down from a rate of 0.7% in Q1, but came in stronger than the expectation of a 0.1% expansion in the reported period.
(This story was corrected on August 19 at 04:40 GMT to say, in the first paragraph, that the UK July Consumer Price Index (CPI) inflation report will take center stage later on Wednesday, not Tuesday.)
