Pound Holds Firm Near $1.35 as US Inflation Data Looms

The British pound is holding steady against the US dollar, trading near $1.35 as markets await the release of US inflation data that could influence expectations for Federal Reserve monetary policy.

The data, set to be released on Wednesday at 12:30 GMT, represents a key catalyst for the dollar, with investors keenly focused on whether inflation is cooling fast enough to justify interest rate cuts in the coming months. The greenback has been under pressure due to growing conviction that the Fed will begin easing policy later this year.

A 72% probability of a 25-basis-point rate cut at the March meeting, as priced by the CME FedWatch Tool, reflects the dovish tilt in markets. This shift has also been driven by softer US economic readings, including a slowdown in manufacturing activity and signs of a cooling labor market.