GBP Rises as Waller Softens Fed Hike Bets Ahead of NFP

The British Pound (GBP) rose against the US Dollar (USD) on Thursday as Federal Reserve Governor Christopher Waller expressed a more neutral stance on monetary policy, tempering bets of a rate hike. In his comments, Waller stated that if upcoming inflation data shows cooling, he would allow the disinflation process to resume and consider rates unchanged. However, he also noted that if inflation comes in hot, he would not hesitate to consider a rate increase.

Waller's remarks triggered a repricing in money markets, with the odds of a 25-basis-point (bps) rate hike shrinking from over 60% to 54%. The US labor market data showed solid performance, with the ISM Services PMI exceeding forecasts at 55.4 in August.

Bank of England Chief Economist Huw Pill was hawkish, saying that raising rates 'may serve to head off some of the potential insidious catch-up dynamics' and that he believed a need to raise Bank Rate to 4%.