GBP/USD Holds Near 1.3530 as US CPI Eases Fed Hike Bets, UK GDP in Focus

The British Pound remains firm against the US Dollar on Wednesday, with GBP/USD trading around 1.3525 and reaching an intraday high above 1.3530. Sterling is benefiting from modest Dollar weakness after the latest US inflation report reinforced expectations that the Federal Reserve may leave interest rates unchanged in September.

US CPI Keeps Pressure on the Dollar

The US Bureau of Labor Statistics reported that the Consumer Price Index increased 0.1% in July, while annual headline inflation eased to 3.4%. Core CPI, which excludes food and energy, rose 0.2% month over month and 2.5% year over year.

The report was broadly consistent with expectations, but it provided little reason for markets to increase bets on another Federal Reserve rate hike.

Market pricing moved slightly more dovish following the release. According to CME FedWatch data cited by Barron’s, the probability of a September rate increase fell to around 44.1% from 48.4% immediately before the CPI numbers.

This shift in Fed expectations is providing support to GBP/USD because lower expectations for US interest rates can reduce the Dollar’s yield advantage against other major currencies.

Fed Outlook Remains a Major GBP/USD Driver

The Federal Reserve currently maintains its federal funds target range at 3.50% to 3.75%. While inflation remains above the central bank’s 2% objective, the latest CPI numbers strengthen the case for policymakers to remain patient rather than immediately tighten policy again.

However, the inflation debate is far from over. Energy prices remain elevated, meaning policymakers will continue monitoring whether higher oil costs begin feeding through more strongly into consumer and producer prices.

That makes Thursday’s US Producer Price Index another important event for Dollar traders.

US PPI Is Next for the Dollar

The US Producer Price Index for July is scheduled for Thursday, August 13 at 8:30 a.m. Eastern Time. The report will provide another indication of inflationary pressure within the US economy.

A softer PPI reading could reinforce expectations for a September Fed pause and potentially help GBP/USD extend its gains.

A stronger-than-expected report, however, could revive concerns about persistent inflation, push US rate expectations higher and provide renewed support for the Dollar.

UK GDP Becomes Sterling’s Next Major Test

The focus for the Pound now shifts to the UK’s preliminary second-quarter GDP report, which is scheduled for release on Thursday, August 13 at 7:00 a.m. UK time. The Office for National Statistics will also publish June monthly GDP, services, production, construction and trade data at the same time.

The UK economy expanded by 0.6% quarter over quarter in Q1 2026, meaning Thursday’s figures will show whether that momentum continued into the second quarter.

A stronger-than-expected GDP reading could reinforce expectations that the Bank of England can maintain relatively restrictive monetary policy, potentially supporting Sterling.

Weak growth, however, could create concerns about the UK economic outlook and limit GBP/USD’s recent advance.

Bank of England Keeps Rates Restrictive

The Bank of England currently holds Bank Rate at 3.75%. At its latest decision, the central bank also highlighted that inflation has fallen to 2.6%, although higher and volatile energy prices could push inflation upward again later this year.

This leaves Sterling supported by relatively high UK interest rates, but future GBP performance will depend heavily on incoming growth and inflation data.

GBP/USD Outlook

The short-term GBP/USD bias remains constructive while the pair holds near the 1.3500 psychological level.

The recent move toward 1.3530-1.3540 establishes that region as the immediate upside area to watch. A sustained move higher could strengthen bullish momentum, particularly if UK GDP beats expectations or US PPI comes in softer than forecast.

On the downside, a return below 1.3500 could signal renewed consolidation, especially if Thursday’s economic releases provide support for the US Dollar.

For now, Sterling retains the advantage, but UK GDP and US PPI could determine the next significant GBP/USD move.