GBP Retreats from Session Highs as UK CPI Matches Expectations

The British Pound (GBP) declined against the US Dollar (USD) on Wednesday after the release of the UK Consumer Prices Index (CPI) data for August. The CPI accelerated in line with market consensus, rising to 3.1% year-over-year from 2.9% in July. The core CPI also remained steady at 2.6%, matching expectations.

The producer prices index beat forecasts, increasing to a 6.1% year-over-year rate in August from 4.9% in July, above the 5.4% market consensus. This figure, however, does not alter the view that the Bank of England (BoE) will leave its benchmark interest rate steady at 3.75% on Thursday.

The Federal Reserve (Fed) is widely expected to hike interest rates by 25 basis points later in the day, with a strong US Nonfarm Payrolls report and hot inflationary figures released last week prompting futures markets to price in a 92% chance of a rate hike. Analysts at TD Securities anticipate that the Fed's interest rate projections may show a lower number of hikes than markets anticipate.