- GBP/USD gains ground to near 1.3545 in Friday’s early European session.
- Traders trim bets of rate cuts by the Fed in September after hotter US July PPI data.
- The UK economy posted a surprise 0.3% growth in the three months to June.
The GBP/USD pair gathers to around 1.3545 during the early European session on Friday, bolstered by a weaker US Dollar (USD). Additionally, the stronger-than-expected UK economic data underpins the Pound Sterling (GBP) against the Greenback. Markets might turn cautious later on Friday as traders await the release of the US July Retail Sales report.
Traders adjusted their expectations for interest rate reductions from the US central bank after the latest soft data on US jobs and Consumer Price Index (CPI) inflation reports. Rising bets of a US Federal Reserve (Fed) rate cut in September weigh on the Greenback. However, hotter-than-expected Producer Price Index (PPI) inflation data released on Thursday prompted traders to trim wagers on rate cuts by the Fed in September.
The chance of a 25 basis points (bps) cut by the US central bank retreated slightly after the PPI figures, according to the CME FedWatch tool. Fed funds futures traders are now pricing in nearly a 92% chance of a 25 basis point (bps) cut next month, down from a 96% possibility before the PPI data was released.
The upbeat UK Gross Domestic Product (GDP) report provides some support to the Cable. The UK economy expanded 0.3% QoQ in the second quarter (Q2) of 2025, compared to a 0.7% growth in Q1, the Office for National Statistics (ONS) showed Thursday. This figure came in better than the expectation of a 0.1% expansion in the reported period. On an annual basis, the UK GDP grew 1.2% in Q2 versus 1.3% prior. This reading was above the market consensus of 1.0%.
Traders will take more cues from the US Retail Sales later on Friday. This report could offer some hints about the US interest rate outlook. In case of a hotter-than-expected outcome, this could lift the Greenback and create a headwind for the major pair. The Retail Sale in the US is expected to show an increase of 0.5% in July.
