GBP/USD remained stable after posting a 0.5% gain in the previous session, trading around 1.3500 during the Asian session on Wednesday (August 13). The pair strengthened further as the US dollar (USD) weakened, driven by the latest US inflation data, which reinforced expectations of a Fed rate cut in September.
The US Consumer Price Index (CPI) rose 2.7% year-on-year (yoy) in July, matching the 2.7% increase recorded in the previous month and below expectations of a 2.8% increase. Meanwhile, the annual core CPI rose 3.1% in July, compared to the 2.9% increase recorded in June, above market consensus of 3%.
The market is currently pricing in a 94% chance of a Fed rate cut at its September meeting, up from 86% the day before, according to the CME FedWatch tool. Last week, Fed Governor Michelle Bowman stated that three interest rate cuts were likely appropriate this year.
The GBP/USD pair strengthened as the pound strengthened, as upbeat UK labor market data on Tuesday could allow Bank of England (BoE) officials to maintain their "gradual and cautious" monetary expansion stance.
The UK Employment Change reported the creation of 239,000 new jobs in the second quarter, surpassing the 134,000 workers employed in the three months ending in May. The ILO Unemployment Rate remained consistent at 4.7%, in line with forecasts. The Claimant Count Change for July fell by 6.2,000, while it was expected to rise to 20.8,000. Traders shifted their focus to the UK's preliminary Q2 Gross Domestic Product (GDP) and factory data for June on Thursday. (alg)
Source: FXstreet
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