GBP Retreats as Sticky PCE Prices Revive Fed Hike Bets

The British Pound (GBP) has retreated from its recent high against the US Dollar (USD), dropping below 1.3600 as the USD stages a recovery following the release of US inflation data.

The data showed that the Core Personal Consumption Expenditures (PCE) Price Index in July was steady at 3.3% year-over-year, with headline PCE holding at 3.7%, above estimates of 3.6%. This has revived bets on a Federal Reserve (Fed) rate hike towards the end of the year.

Money markets had previously priced in a narrow 39% chance of a rate hike in September and 27 basis points of tightening in December, but now odds are at 74% for a 25-basis-point increase.