British Pound feels the heat as hot PPI puts Fed hike in play

• US PPI tops forecasts annually, lifting September Fed hike odds.
• Oil above $100 keeps inflation pressure firmly on traders’ radar.
• UK GDP and CPI data may test BoE patience.

The Pound Sterling loses traction against the US Dollar after the latest producer inflation report, which exceeded estimates, prompting investors to price in a more hawkish Federal Reserve. The GBP/USD trades at 1.3525, down 0.17%.

GBP/USD slips as hot PPI and $100 Oil revive Fed risks

The US Producer Price Index (PPI) in August was in line with estimates of 0.4% MoM, but exceeded forecasts on an annual basis at 5.4%, above the 5.3% projected. Core figures were mostly aligned with economists' estimates, though the monthly figure was 0.2% below estimates of 0.3%, in line with projections of 4.6% YoY.

Following the data release, traders seem more confident that the Fed will raise interest rates at the September meeting. The CME FedWatch Tool shows a nearly 70% chance of a 25-basis-point rate increase.

Worth noting that energy prices continued to trend higher, with Brent and West Texas Intermediate prices surpassing the $100 per barrel barrier once again as the Middle East conflict enters its seventh month of hostilities.

Other data showed that the labour market remains solid, with jobless claims at 206K, above forecasts of 205K but below the previous week's print.

Given the backdrop, traders' focus shifts to the US Consumer Price Index (CPI) report on Friday.

In the UK, Bank of England (BoE) officials remained split, yet its expected to keep interest rates unchanged at the September 17 meeting, with Governor Bailey pushing back against expectations for further tightening.

Also, traders are waiting for GDP data on Friday, which is expected to stall at 0%, down from 0.3% MoM in June. Besides this, investors are waiting for British inflation and wage growth data next week.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3528. The pair holds a mild bullish bias as it sits above the clustered simple moving averages around 1.3476 and has reclaimed several former trend-line barriers, turning them into underlying support. The Relative Strength Index (14) hovers just above the 50 line, hinting that upside momentum is tentative rather than impulsive, but still favors further gains while the price action remains supported by these reclaimed structural levels.

On the downside, initial support is seen at the nearby moving-average cluster around 1.3476, reinforced by the broken downward and upward trend lines at 1.3467 and 1.3448. A deeper pullback would expose the former resistance trend-line break at 1.3362 as a more distant floor. On the topside, the next notable resistance comes in at the upward trend-line break near 1.3675, where bulls would likely face a more meaningful test of the emerging uptrend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)