British Pound Retreats to One‑Week Low Below 1.36 as Dollar Strengthens

The British pound (GBP) extended its decline for a second straight day on Thursday, as the US dollar (USD) gained ground after Wednesday’s hotter‑than‑expected US inflation data. The GBP/USD pair fell to a one‑week low of 1.3675 ahead of the US session, opening more than 0.5 % below Wednesday’s peaks, around the mid‑1.3600s.

Wednesday’s US data showed that the Personal Consumption Expenditures (PCE) Price Index rose more than forecast in July, with the annual rate holding at 3.7 % despite expectations of a slight pull‑back. Core PCE inflation also remained steady at 3.3 %, both readings comfortably above the Federal Reserve’s 2 % target.

Markets Seek Clearer Fed Guidance Ahead of September FOMC

The data reinforce pressure on the central bank to consider raising interest rates in the months ahead, yet the probability of a September hike remains unchanged at 36 %, according to the CME’s FedWatch Tool.

ING strategists characterized Wednesday’s US releases as “a mixed bag, providing modest support for the dollar while leaving the market’s uncertainty about the September FOMC unresolved (current pricing implies a 9 bp move).”

Against this backdrop, ING says it remains “reasonably confident” in its expectation that the Fed will hold rates on 16 September, which would support a weaker dollar. The bank warns, however, that “the next three weeks may need a more compelling mix of data and Fed commentary before markets shift toward a hold scenario,” noting that current pricing still leaves room for rate‑hike expectations to change.

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