US inflation higher than expected, Pound eyes UK GDP

[Redator]

The British pound continues to have a calm week. Early in the North American session, GBP/USD is trading at 1.3546, up 0.14% on the day.

US inflation rises to 0.4% in August

US inflation climbed 0.4% m/m in August, up from 0.3% in July and above the market estimate of 0.2%. Annual CPI rose to 2.9% from 2.7%, in line with the market estimate. Core CPI came in at 0.3% m/m and 3.1% y/y, unchanged from July.

The core rate continues to hover well above the Federal Reserve's 2% target but that isn't expected to stop the Fed from lowering rates next week for the first time since December 2024. Although a rate cut has been fully priced in, we could see downward pressure on the US dollar if the Fed cuts, especially if the Fed's tone at the meeting is dovish.

The US economy is showing signs of cooling, especially the labor market. Nonfarm payrolls fell to just 22 thousand and annual revisions for the year prior to March 2025 were revised downwards by a massive 911 thousand, much more than expected. The weak nonfarm payrolls report has raised the odds of a half-point cut to 10%, with a 90% chance of a quarter-point reduction.

UK GDP expected to slip

UK GDP for July is expected to ease to 0% m/m, following a 0.4% gain in June. The previous two readings came in at -0.1%, pointing to a bumpy recovery for the UK economy. GDP is expected to tick lower to 0.2% for the three months to July, down from 0.3% in the previous release.

With the BoE expecting inflation to hit 4% in September, it will be difficult for the Bank to lower rates, as inflation could rise even higher as a result. Governor Bailey told a parliamentary committee last week that he was doubtful about further rate cuts before the end of the year.

GBP/USD Technical

• GBP/USD is testing resistance at 1.3534. Next, there is resistance at 1.3556
• 1.3508 and 1.3486 are the next support levels

GBP/USD 1-Day Chart, September 11, 2025

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