GBP Rebounds as UK Growth Outshines US CPI Surprise

The British Pound (GBP) rebounded against the US Dollar (USD) after the release of the US Consumer Price Index (CPI) in August, which came in line with forecasts. The CPI rose 0.4% month-over-month and 3.4% year-over-year, while core CPI increased 2.4%, matching expectations.

Despite the initial reaction to Dollar strength, most G8 FX currencies have recovered. Money markets now price a 88% chance of a 25 basis point Fed rate hike next week, up from around 60% previously.

In contrast, UK GDP figures revealed the economy grew at its fastest pace in 18 months in July, by 1.6% year-over-year, above estimates of 1.2%. This has helped steady the Pound before the Bank of England's (BoE) decision next week.