The British pound climbed to around 1.3570 against the US dollar during European trading hours on Wednesday (August 13). The currency pair continued its upward trend as the market bet that the Federal Reserve will cut interest rates at its September policy meeting led to selling pressure on the US dollar.



As of press time, the US dollar index (DXY), which tracks the exchange rate of the US dollar against six major currencies, fell to around 97.64, hitting a two-week low.

The probability of a rate cut at the Federal Reserve's September meeting has risen to 94% from about 86% on Monday, according to the CME FedWatch tool.

Traders increased their bets on a dovish Federal Reserve after the US Consumer Price Index (CPI) report showed no significant pass-through from tariffs on prices. The inflation data was largely in line with expectations: headline inflation rose steadily by 2.7% year-on-year, below the expected 2.8%. Excluding volatile food and energy prices, the core CPI rose from 2.9% to 3.1% year-on-year, exceeding the expected 3%.

Contrary to market expectations, some analysts believe a September rate cut isn't a done deal, as employment and inflation data will be released before the monetary policy meeting. "As the last non-farm payroll report showed, a single report can be enough to change policy direction. Therefore, we believe we still need to wait for the remaining data releases before we can definitively determine whether to cut or maintain interest rates," said analysts at Commonwealth Bank of Australia.

Sterling rises ahead of UK second-quarter GDP data

The British pound strengthened against its major peers on Wednesday as investors awaited preliminary UK second-quarter GDP data due on Thursday.

Economists expect the UK economy to grow by just 0.1%, significantly slower than the 0.7% growth in the previous quarter. Year-on-year growth is expected to be 1%, lower than the 1.25% forecast released by the Bank of England in its monetary policy decision last week. The UK economy grew by 1.3% year-on-year in the first quarter of this year.

The slowdown in GDP growth will add to policy pressures at a time when Bank of England officials are already concerned about rising inflationary pressures. Last week, the Bank of England raised its one-year consumer price index (CPI) forecast to 2.7% from 2.4%.

Meanwhile, a cooling labor market driven by rising corporate social security contributions is a major concern for central bank policymakers. The latest labor market report shows an estimated decline of 44,000 job openings to 718,000 in the May-July quarter. The preliminary estimate for the number of payroll employees in July fell by 8,000 from the previous month.

The report pointed out that feedback from job vacancy surveys showed that some companies may suspend recruitment or fill resigned positions.

During Wednesday's trading session, investors will focus on policy speeches from Richmond Fed President Barkin, Atlanta Fed President Bostic and Chicago Fed President Goolsbee for new clues on the outlook for U.S. monetary policy.

Technical analysis: GBP jumps to around 1.3570

On Wednesday, the GBP/USD pair continued its upward trend to around 1.3570. As the exchange rate remained above the 20-day exponential moving average of 1.3425, the short-term trend of GBP/USD is bullish.

The 14-day relative strength index (RSI) is approaching the 60.00 mark, a break above which would trigger fresh bullish momentum.

On the downside, the August 1 low of 1.3140 will form a key support area; on the upside, the July 1 high near 1.3790 will form an important resistance level.