GBP Retreats as US Inflation Data Boosts Hawkish Bets on Fed

The British Pound (GBP) has retreated from its earlier high as investors react to US inflation data, which suggests that the Federal Reserve may raise interest rates later this year.

According to a recent report, the Core Personal Consumption Expenditures (PCE) Price Index in July remained steady at 3.3% year-over-year, while headline PCE held steady at 3.7% YoY, both above estimates. This has boosted hawkish bets on the Fed.

The US Dollar Index (DXY), which tracks the performance of the dollar against a basket of six currencies, rose 0.27% to 99.17 following the data release. Meanwhile, US Treasury yields increased, with the 10-year benchmark note edging up four basis points at 4.664%.

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