GBP/USD Hits Three-Month Highs as Fed Rate Hike Odds Plummet
The British Pound (GBP) has extended its gains for the second consecutive day, reaching three-month highs at 1.3570 against the US Dollar (USD). This uptrend is largely due to broad-based USD weakness, which began after investors reassessed their expectations of Federal Reserve monetary policy.
Last week's release of US data revealed a decline in Retail Sales and moderating inflationary pressures. These indicators led futures markets to slash the odds for a September rate hike from above 50% to just 30%, as measured by the CME Group's FedWatch Tool.
Despite moderate growth in Q2, July's Industrial Production fell unexpectedly in the UK, keeping uncertainty surrounding the Bank of England's monetary policy plans. Strategists at UOB Group caution that any advance in the GBP is expected to face firm resistance at 1.3600 and note that only a breach of 1.3495 would indicate that the GBP is not ready to move towards 1.3600.
The breakout above 1.3440-1.3540 range, while not decisive, indicates an upward bias remains intact for the GBP/USD pair.