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The British Pound (GBP) extends its rally against the US Dollar (USD), driven by growing expectations of a Federal Reserve rate cut in September.
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Despite a stronger-than-expected US core CPI reading, markets are focusing on signs of economic softening, fueling speculation of Fed policy easing.
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Investors also await the UK’s Q2 GDP report, which could offer further direction for GBP/USD in the near term.
The GBP/USD pair rallied firmly during the North American session on Wednesday, advancing by 0.56% to trade around 1.3572 after bouncing off intraday lows of 1.3487. The surge in the Pound Sterling comes amid growing market confidence that the US Federal Reserve may resume its easing cycle as early as September, despite a hotter-than-expected core Consumer Price Index (CPI) reading for July. This combination of soft headline inflation and underlying economic concerns has significantly weakened the US Dollar across the board.
Sterling outperformed most of its G10 peers throughout the day, with sentiment also buoyed by investor anticipation ahead of the UK’s preliminary second-quarter Gross Domestic Product (GDP) figures, which are due on Thursday. Analysts expect the UK economy to show modest growth, potentially adding further support to the Pound if results meet or exceed expectations.
In the Asian trading hours, GBP/USD remained steady around the 1.3500 mark, following a 0.5% gain in the previous session. The pair extended its gains as the Greenback struggled to find demand, pressured by a dovish shift in Fed expectations driven by the latest US inflation report. Market participants are now increasingly pricing in a September rate cut, shifting sentiment firmly against the US Dollar.
Looking ahead, the GBP/USD pair is likely to remain sensitive to incoming macroeconomic data from both sides of the Atlantic, particularly Thursday’s UK GDP release and further commentary from Federal Reserve officials. For now, bullish momentum favors the Pound, with the broader macro backdrop aligning against the Dollar.
