GBP/USD holds near 1.3400 as hot CPI pressures dollar

GBP/USD traded near 1.3400 on Wednesday after a hotter-than-expected US consumer price index report pushed the dollar lower, with traders reassessing the outlook for Federal Reserve interest-rate cuts.

"The hot CPI print removes any near-term prospect of a Fed rate cut, which typically would support the dollar, but the market is instead focusing on the implications for growth," said Sarah Lin, markets reporter at Edgen. "A higher-for-longer rates scenario is weighing on risk appetite and dragging the dollar along with it."

The US dollar index fell as much as 0.3% following the data, while the 10-year Treasury yield climbed 6 basis points to 4.38%. The move in cable — as GBP/USD is known among traders — marked a reversal from earlier session losses, with the pair recovering from an intraday low near 1.3350.

The CPI report showed inflation running above consensus estimates for the period ending May 2026, complicating the Fed's path toward monetary easing. Markets had been pricing in a potential rate cut as soon as September, but the data pushed those expectations further into 2027. Persistent inflation signals that the central bank may need to maintain restrictive policy longer than previously anticipated, a scenario that typically strengthens the dollar but has instead triggered a broader reassessment of US asset attractiveness.

The next catalyst for GBP/USD comes with the Bank of England's policy decision later this month, where traders will watch for any divergence in monetary policy direction between the BoE and the Fed.

This article is for informational purposes only and does not constitute investment advice.