GBP/USD Bounces as Fed's Waller Shifts Stance on Interest Rates
The GBP/USD currency pair is experiencing a rebound after hitting a two-week low near 1.3485 earlier Thursday, due to a shift in Federal Reserve Governor Christopher Waller's stance on interest rates.
Waller said that if upcoming inflation data shows cooling, he would allow the disinflation process to resume and views the current federal funds rate as appropriate, collapsing September hike pricing from 63% to roughly 48%
The dollar index slid to near 99.00, a one-week low, while the 10-year Treasury yield dropped for a second consecutive session to around 4.74% from its highest since October 2023.
With the interest rate differential between the Bank of England and Federal Reserve essentially erased, markets are pricing in approximately 32 basis points of BoE tightening by year-end, with a November hike at almost 70% probability and a second increase by February around 80%
The UK's inflation print came in at 3.3%, up from 3.0% the month before, with services inflation climbing from 4.3% to 4.5%, not disinflation stalling but re-accelerating.