Pound Sterling Stalls at 1.3550 Ahead of US Inflation Data

GBP/USD traded flat at 1.3550 on Wednesday. The pair is awaiting US inflation data that will shape policy expectations. The Federal Reserve is expected to decide on a rate hike on September 16. The Bank of England meets on September 17. Both central banks currently hold rates at 3.75%.

Market participants price a 60% probability of a Fed rate increase. This outlook follows remarks by Fed Chair Kevin Warsh at Jackson Hole. The Bank of England voted 6-3 to hold rates in July. Three members favored a rise to 4%. The Bank of England faces inflation rising toward 3.2% due to energy costs.

US Data Will Define The Fed Path

US Producer Price Index data releases on Thursday. Core PPI is expected at 0.3% month-over-month. US Consumer Price Index data follows on Friday. Core CPI is expected at 0.2% month-over-month. A higher-than-expected print supports the case for a rate hike. A lower print increases the likelihood of rate cuts.

Higher US inflation data strengthens the US Dollar. This typically weakens the Pound Sterling. Lower data allows the market to reprice the probability of rate cuts. This scenario supports a rally in the Pound Sterling. The outcome of these releases directly impacts the GBP/USD exchange rate.

Technical Levels Define The Trading Range

The pair has declined for two weeks from 1.3675. The 1.3550 level acts as session support. The 50-day and 200-day moving averages cluster near 1.3550 and 1.3400. These moving averages establish two technical tiers. Resistance sits at 1.3650.

The Stochastic RSI indicator is oversold but turning upward. This suggests selling momentum is fading. The 1.3475 level is the primary support. A break below 1.3475 targets 1.3400. A break above 1.3650 targets the August high of 1.3675.

Bank Of England Decision Follows US Data

UK CPI data releases on Friday before the Bank of England decision. UK inflation is expected at 2.6% year-over-year. The Bank of England announces its decision on September 17 at noon GMT. A hot UK inflation reading strengthens the case for a rate hike. The hawkish minority on the Monetary Policy Committee favors a rise to 4%.

The timing of the UK data release is critical. It lands before the Bank of England vote. This sequence allows the data to influence the final decision. The market monitors the alignment between US and UK inflation trends. This alignment determines the relative strength of the currencies.

Traders use the GN markets/inflation (en-US) data to gauge these shifts. The divergence between Fed and Bank of England stances creates volatility. The Pound Sterling remains sensitive to US policy signals. The next two days will clarify the direction of the pair.