GBP/USD Falls Below 1.3500 as Fed Hike Bets Loom Large

The British pound has lost ground against the US dollar in recent trading sessions, slipping below 1.3500 and reaching its lowest level since August 14. The dollar's strength is largely attributed to the Federal Reserve's impending rate hike, with futures implying a 100% probability of an increase on Wednesday.

The pound has outperformed the euro on this session, but investors are now focused on the Bank of England's decision on Thursday at 11:00 GMT. The BoE's nine-member rate committee is expected to maintain its current stance with a 6-3 vote in favor of holding rates.

The UK data releases have shown mixed results, with unemployment expected to rise to 5% for the three months to July and pay growth including bonuses forecast at 3.9%. The inflation rate is also set to increase to 3.1% for August, while core inflation remains at 2.7%.

The Fed's decision on Wednesday will have a significant impact on interest rates, with the US overnight funding rate expected to surpass the UK's by a substantial margin. This could lead to capital flowing towards higher-yielding American assets and further weaken the pound.