Sterling traded in a choppy range, rising into the 06:00 GMT inflation release before failing just shy of 1.3500 and then reversing. GBP\/USD was last just above 1.3450, down 23 pips on the day, after giving back 53 pips over roughly six hours and extending the retreat by a further 30 pips. UK CPI rose 3.1% year on year in August versus 2.9% in July, matching forecasts, while core inflation held at 2.6% and services prices stayed at 3.4%. The move in prices was concentrated in motor fuel, leaving the domestic inflation picture unchanged as the market turned to US rate risk.<\/p>\n
Attention shifts to the Federal Reserve at 18:00 GMT, with the US policy range at 3.50\u20133.75% expected to move to 3.75\u20134.00% versus the Bank of England\u2019s 3.75% Bank Rate; on midpoints, the carry flips by an eighth of a point. Sterling is down roughly 230 pips from its August high, while US retail sales rose 1.2% in August against a 0.8% forecast and the control group increased 1.4%. Futures imply a US rate of 4.15% by December and 4.52% by summer 2027, versus the Fed\u2019s last projection of 3.6% next year; UK pricing has Bank Rate at 4% by November and around 4.25% in early 2027. <\/p>\n
The BoE decision is due 11:00 GMT Thursday, with a 6\u20133 hold expected; odds of a hike are near 30%, up from under 10% a week ago, as PPI rose 0.7% m\/m versus 0.3% and 3.7% y\/y versus 3.3%, while Friday sales are forecast at -0.2% after -0.5%, and -0.2% ex-fuel. Technical levels cited include resistance near 1.3500 and 1.3550, support just under 1.3450 around the 200-day EMA, then 1.3400 and 1.3350, with the daily Stoch RSI near 16 for three sessions.<\/p>\n\n\n\n