Pound Edges Closer to Multi-Month High as Markets Await US Inflation Data

The British pound has been holding steady near its strongest level in several months against the U.S. dollar, but investors are on edge as they await the latest U.S. inflation reading due later this week.

The core PCE price index, the Federal Reserve's preferred inflation gauge, is expected to influence the near-term direction of the dollar and, by extension, the GBP/USD pair.

A hotter-than-expected print could reinforce the case for the Fed to keep interest rates higher for longer, boosting the dollar and putting pressure on the pound. Conversely, a softer reading might fuel expectations of rate cuts, which would likely weaken the dollar and support sterling.

The pound's resilience comes amid a broader reassessment of global interest rate trajectories, with traders currently pricing in around 50 basis points of Bank of England rate cuts by the end of 2025, compared to roughly 75 basis points for the Federal Reserve.