GBP/USD Struggles to Hold Ground as Fed Hike Expectations Rise
The Pound to Dollar (GBP/USD) exchange rate has been struggling to hold its ground above 1.35, despite stronger-than-expected UK GDP data providing Sterling with support.
UK growth expanded by 0.4% in July, exceeding consensus forecasts, and annual growth accelerated to 1.6%, while services output increased by 0.4%.
However, the Pound remains constrained by an increasingly hawkish Federal Reserve outlook, with markets now heavily pricing a US rate hike next week.
The US Consumer Price Index (CPI) released on Friday showed a 0.4% increase in August, matching expectations, and reinforced expectations that the Federal Reserve will raise interest rates at its upcoming meeting.
Markets have increased the implied probability of a 25-basis-point hike to around 85%, compared with roughly 70% before the CPI release.