GBP/USD Braces for Fed Decision Amid Inflation Fears
The Pound Sterling (GBP) is facing increased pressure as the market awaits the Federal Reserve's decision on inflation. The Fed, led by Chair Kevin Warsh, is expected to raise interest rates on September 16, with markets pricing in over 60% odds of a quarter-point hike.
The Bank of England's Monetary Policy Committee (MPC) voted 6-3 to hold interest rates at 3.75%, but three members preferred a move to 4%. The BoE faces the same energy shock pushing inflation toward 3.2% this year, but Warsh views the inflation problem as unresolved.
The GBP/USD pair has been in an indecisive state, with a rally from 1.3400 in early August running out of steam near 1.3675 on August 21. The pair has since ground lower for two weeks, with support at 1.3550 and resistance at 1.3650.
The next key data releases will be the US Producer Price Index (PPI) on Thursday and the US Consumer Price Index (CPI) on Friday. A hotter print could extend Warsh's case for a hike, while a softer print would let the market reprice rate cuts back in, potentially strengthening the Sterling.