Pound continues weak against the US dollar as hopes that the Fed will opt for a significant rate drop fall.

During Thursday’s European trading hours, the Pound Sterling (GBP) performed middling against its key counterparts. The British pound may gain strength as market participants believe the Bank of England’s (BoE) policy-easing cycle will be less aggressive than that of other central banks.

Investors expect the BoE to leave interest rates unchanged at 5% at its September meeting.

According to a Reuters poll, the BoE projected to keep interest rates unchanged. at 5% next week, but  expected to cut them again in November, despite inflation continuing above the bank’s 2% objective. BoE Governor Andrew Bailey’s statements at the Jackson Hole (JH) Symposium also suggested that the central bank will progressively lower interest rates to keep inflationary pressures under control.
An increase in market expectations for the BoE to keep interest rates unchanged this month looks to be the result of strong job growth and a drop in the unemployment rate. The unemployment rate fell to 4.1% in the three months ended in July, while UK firms employed 265K new employees, much more than the previous announcement of 24K.

Moving forward, the next big triggers for the Pound Sterling will be The United Kingdom (UK) Consumer Price Index (CPI) figures for August, as well as the BoE’s interest rate decision, set to be release next week.

Daily market movers: Pound Sterling trades cautiously against the US dollar.

In Thursday’s London session, the pound sterling battles to maintain its late Wednesday recovery move from psychological support of 1.3000 to roughly 1.3050 versus the US dollar (USD). The GBPUSD pair’s outlook remains bearish as the US Dollar achieves a new weekly high, with investors increasingly confident that the Federal Reserve (Fed) will begin the policy-easing process with a 25 basis-point interest-rate cut.
The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, has risen to around 101.80. Investors have speculated for weeks. on the amount of the forthcoming Federal Reserve rate drop. The US dollar is rising as prospects for a tiny 25-basis-point interest rate cut grow after the Consumer Price Index (CPI) data for August, issued on Wednesday, showed hints of some stickiness in inflationary pressures.
Annual headline inflation came slightly lower than expected. However, core inflation data, which excludes volatile food and energy prices, remained unchanged. Core inflation rose by 3.2%, as expected, although the monthly number increased by 0.3%, quicker than the 0.2% forecast.
Sticky US core inflation statistics lowered market hopes for major Fed rate reduction. According to the CME FedWatch tool, the probability that the Fed will reduce interest rates by 50 basis points (bps) to 4.75%-5.00% in September has decreased to 13% compared to 40% a week earlier.

Market traders await the August US PPI report.

Investors will be looking forward to the August US Producer Price Index (PPI) data and the Initial Jobless Claims for the week ending September 6. Both reports will be issued at 12:30 GMT.
The headline producer inflation data is predicted to have slowed further due to lowering energy prices, while core statistics are projected to have increased.