GBP/USD holds above 1.3400 as geopolitical optimism weighs on the US Dollar, though traders remain cautious ahead of Tuesday's US CPI data and a potential Fed rate hike in December.
The pair has risen over 0.50% to 1.3402 as Trump downplays US-Iran escalation, weakening the Dollar (DXY -0.36% to 101.91), while last week's BoE rate hike in a 7-2 vote supports the pound. However, Tuesday's US CPI is forecast to rise to 3.9% YoY with core at 2.8%, which could fuel a hawkish Fed repricing (December hike odds already at 82%) and cap gains.
The Dollar Index is down 0.36% at 101.91 as geopolitical optimism after Trump downplayed US-Iran escalation prompts buying of riskier currencies. The bearish push may not last: hawkish comments from Chicago Fed's Goolsbee and a 82% chance of a December Fed hike, plus Tuesday's CPI expected at 3.9% YoY, could restore Dollar strength.
The British Pound climbed over 0.50% to trade at 1.3402 on Monday as President Trump downplayed potential US-Iran war escalation. This geopolitical optimism weakened the US Dollar Index by 0.36% to 101.91, providing a tailwind for the pair. Markets are now focused on Tuesday's US CPI report, with headline inflation expected to rise to 3.9% YoY, potentially influencing the 82% probability of a Federal Reserve rate hike in December.
Trump downplayed a US-Iran escalation, which weakened the US Dollar, and the Bank of England had just raised rates with two dissenters wanting an even bigger hike, both supporting GBP/USD above 1.3400.
Tuesday's US CPI is expected to rise to 3.9% YoY with core at 2.8%; a hotter print would boost the odds of a Fed rate hike in December (already 82%) and could strengthen the Dollar against the pound.
Trump downplayed a potential US-Iran war escalation, easing geopolitical fears and pulling the Dollar Index down 0.36% to 101.91 as traders buy riskier currencies.
A hotter-than-expected US CPI on Tuesday (forecast 3.9% YoY) would reinforce expectations of an 82%-likely Fed rate hike in December and could lift the Dollar.