Pound Surges as Fed Hike Bets Fall Amid Weaker US Data
The British Pound (GBP) has gained strength against the US Dollar (USD) as bets for a US Federal Reserve (Fed) rate hike decline. The GBP/USD pair rose to near 1.3555 during European trading hours on Monday.
A weaker US economy, with falling retail sales and tame inflation data, has led to reduced expectations of a Fed interest rate increase at its upcoming policy meeting. According to the CME FedWatch Tool, there is now only a 31% probability of a rate hike, down from 35% after the release of the US Retail Sales report.
Bank of England (BoE) Chief Economist Huw Pill has stated that stronger-than-expected UK economic growth readings support the case for higher borrowing costs to bring inflation back to target. While fundamental releases have been limited, recent BoE communication has remained hawkish, sustaining the constructive tone around GBP.