GBP/USD Steady as BoE Prepares to Meet Amid Fed Rate Decision Uncertainty

The British pound (GBP) held steady against the US dollar (USD) following the release of UK inflation data, which showed prices rose to their highest level since March at 3.1% year-over-year in August.

The increase was driven by higher fuel costs and airfares amid ongoing global tensions, but the pound remained largely unchanged in response. Expectations for a Bank of England (BoE) rate hike have not shifted, with markets still predicting four increases over the next 12 months.

However, BoE Governor Andrew Bailey cautioned that new risks are emerging, such as rising food prices due to domestic weather challenges and the impact of Super El Niño. The BoE meets this week, and many expect it to maintain its current stance on rates.

In related news, the US dollar has paused at a two-week high ahead of the Federal Reserve's rate decision, with markets nearly certain (91%) that the Fed will hike rates by 25 basis points. This move is largely expected, so any benefit from the rate increase may be minimal.