Pound Rises as Soft US Inflation Data Weighs on Fed Hike Bets

The British Pound (GBP) has gained modest ground against the US Dollar (USD), driven by softer-than-expected US inflation data. The Producer Price Index (PPI) in July fell to 4.7% year-over-year, below forecasts of 4.9%. This development has weighed on the USD and bolstered expectations that the Federal Reserve may hold off on a rate hike at its September 16 meeting.

Recent US jobs data have hinted at a solid labor market but also showed signs of weakness, which, combined with benign inflation readings, might prevent an interest rate increase. Money markets continue to price in a 60% chance of a Fed hold at the September meeting.

Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin have expressed hawkish views on monetary policy, but their comments also acknowledged potential for growth and inflation.

The UK's GDP grew 0.4% on a quarterly basis in Q2 2026, meeting estimates. The Bank of England (BoE) will be monitoring the economy closely as it sets its next monetary policy decision.