GBP Edges Higher Against USD as BoE Interest Rate Hikes Remain Unlikely

The British Pound has edged up against the US Dollar to near 1.3640 despite the Greenback's strength in the European trading session on Tuesday.

Analysts at Danske Bank note that UK inflation data for July were broadly in line with expectations, with headline CPI rising to 2.9% year-over-year (y/y), mainly driven by a 13% increase in the Ofgem energy price cap from 1 July.

The combination of this inflation print and 'yesterday's weak labour market data' has 'taken the top off BoE pricing for the remainder of the year,' according to Danske Bank.

Meanwhile, strategists at Scotiabank describe the current technical backdrop for GBP/USD as 'solidly bullish,' noting that after a period of range trading and two tests of 1.3150 (April and June), the pair now appears better poised to advance.