GBP Rallies as US Inflation Pressures Soften Amid Middle East Tensions
The British Pound (GBP) rose against the US Dollar (USD) on Friday as cooler-than-expected US consumer and producer price data limited the Federal Reserve's room for further interest rate hikes.
The GBP/USD pair reached near 1.3495 during European trading hours, with traders looking to the upcoming US July Retail Sales report for further guidance.
The US Bureau of Labor Statistics reported a flat wholesale cost increase in July, below market expectations, and a 0.2% monthly rise in the core Producer Price Index (PPI), lower than forecast.
As a result, traders reduced the odds of a September rate hike from the Fed, with markets now pricing a 34.8% probability, down from 40% immediately after the PPI data.
The UK economy grew by 0.4% quarter-over-quarter in the second quarter (Q2) of 2026, in line with market expectations, and Bank of England Chief Economist Huw Pill stated that stronger-than-expected growth readings reinforced the case for higher borrowing costs to bring inflation back to target.
Societe Generale cautioned that geopolitical tensions could weigh on the UK outlook, but noted that recent indicators suggest domestic momentum has withstood external shocks.