Pound sterling has risen to almost 1.3160 versus the US dollar amid positive market optimism.

The Pound Sterling (GBP) is performing strongly against its major peers at the start of the week, aided by an improved appeal for risk-perceived currencies and a weakening US Dollar, which is under pressure from rising expectations that the Federal Reserve (Fed) will opt for a large interest-rate cut on Wednesday.

Traders still divided on the extent of the Fed’s probable interest-rate decrease.

Firm Fed rate drop predictions have weighed on the US Dollar (USD), with the US Dollar Index (DXY) tracking the The greenback’s value versus six major currencies fell to a new weekly low near 100.80.
On the UK front, the Pound Sterling will be directvby the August Consumer Price Index (CPI) data and the Bank of England’s (BoE) monetary policy announcement, which are due for Wednesday and Thursday, respectively.
Economists expect the annual UK core CPI, which excludes volatile components, to have climbed at a quicker rate of 3.5% from 3.3% in July, with headline inflation steadily increasing by 2.2%. Investors also pay attention to UK service inflation data, a closely watched indication by BoE officials that has remained elevated.

Investors expect the Bank of England to keep interest rates at 5% on Thursday.

The inflation figures will have a substantial impact on market speculation about the BoE’s interest-rate strategy. Currently, financial market participants expect the BoE to leave. Interest rates remain stable at 5%, with only one additional rate drop expected this year.

Daily market movers: Pound Sterling surpasses key peers.

In Monday’s London session, the pound sterling rose to around 1.3160 against the US dollar. The GBPUSD pair rises as investors expect the BoE policy-easing cycle to be less aggressive than that of the Fed.
The Fed is almost set to start reducing interest rates on Wednesday. However, traders are split on whether the rate drop will be 25 or 50 basis points (bps). According to the CME FedWatch tool, the probability of the Fed lowering interest rates by 50 basis points to 4.75%-5.00% in September has significantly increased to 61% from 30%.One week ago.
The release of the August Producer Price Index (PPI) report, which revealed that headline producer inflation fell at a faster-than-expected rate to 1.7%, fueled market speculation for the Fed’s surprise interest rate decrease. Some media stories have also fueled speculation that the Fed may choose for a substantial decrease.
Before the Fed policy statement, investors will be looking at August retail sales data in the United States (US), which will be release on Tuesday. Retail sales data, a crucial indication of consumer spending, expected to have increase by 0.2%, slower than the 1.0% gain reported in July.