GBP/USD Rises Amid UK GDP Boost, But Outlook Darkens

The GBP/USD is experiencing a modest rise on Wednesday, following stronger-than-expected UK GDP data. The Office for National Statistics revealed that Q2 GDP was upgraded to 0.5% in the three months to June, surpassing the initial estimate of 0.4%. This growth marks the UK as the fastest-growing G7 economy in the first half of the year.

Despite this boost, the outlook for the second half of the year is dimming, with expected growth slowing to 0.2% in Q3 and Q4 due to rising living costs. The U.S. dollar is also taking a breather after reaching a two-month high yesterday, as Treasury yields retreat.

U.S. data was weaker than anticipated, with the Conference Board consumer confidence falling to its lowest level since May 2014 and job openings declining more than expected to 7.09 million. This has led to a decrease in October Fed rate hike expectations from 70% to 40%, but traders still anticipate a 90% probability of a year-end rate hike.

Attention will now shift to U.S. core PCE, the Fed's preferred gauge of inflation, expected to rise 0.3% month-on-month, accompanied by final Q2 GDP data and speeches from Federal Reserve officials. Strong data or hawkish Fed officials could lead to a rebound in October rate hike expectations, lifting the U.S. dollar and pulling GBP/USD lower.