- GBP/USD climbed to roughly 1.3545 during early European trading on Friday.
- Traders are reassessing their expectations regarding interest rate cuts from the Fed after the latest PPI data came in hotter than anticipated.
- The UK economy showed a remarkable growth rate of 0.3% for the three months leading up to June.
The GBP/USD exchange rate reached around 1.3545, gaining traction from a weaker US dollar. Additionally, stronger-than-expected economic indicators from the UK are supporting the pound against the dollar. However, caution may set in as traders await the US retail sales figures later today.
Following recent softer data on the US employment and CPI, traders have revised their expectations for interest rate cuts from the Federal Reserve. The initial sentiment had leaned towards a potential cut, but the higher-than-expected PPI figures released on Thursday have led some to readjust those predictions for September.
The CME FedWatch tool indicates that the anticipation for a 25 basis points cut by the Fed may have diminished after the latest PPI data. Currently, odds for a cut next month stand at nearly 92%, with expectations around the PPI data being released sitting at 96%.
In the UK, a positive GDP report is lifting sentiment. The UK economy exhibited a 0.3% growth quarter-on-quarter in the second quarter of 2025, down from 0.7% in the first quarter, according to the Office for National Statistics. This figure surpassed initial expectations for a mere 0.1% expansion. Year-on-year, the UK’s GDP increased by 1.2% to 1.3% in the second quarter, exceeding the 1.0% market consensus.
US retail sales data, to be released later today, is likely to provide further insights into the interest rate landscape. If the numbers come in stronger than anticipated, it could give a boost to the dollar, creating resistance for the GBP/USD pairing. Retail sales in the US are projected to rise by 0.5% in July.
