Sterling Edges Higher as Dollar Waits on US Inflation Data

The British pound edged higher on Wednesday while the euro slipped as traders awaited the US inflation reading that will influence the Federal Reserve's decision to raise interest rates again in September.

The dollar held its ground ahead of the release of the July consumer price index, which is expected to show headline inflation at 0.1% month-on-month and core at 0.2%, pulling year-on-year rates to 3.4% and 2.5%. According to Chris Turner, global head of markets at ING, 'the market looks to be expecting a softer price story today.'

A soft inflation number would drag market pricing of a September Fed rate hike away from a 50% probability in favor of no change, Turner added.

Markets are currently pricing roughly even odds on a Fed rate rise at the September 17-18 meeting. The dollar's performance will be closely watched as traders await the CPI release, with a downside break requiring the index to undershoot expectations.