The British pound maintained a steady position at $1.3520 in Thursday’s early European trading hours, with investors showing restraint ahead of the upcoming UK gross domestic product (GDP) release scheduled for Friday. The GBP/USD pair reflected limited movement across major trading platforms as the forex market braced for continued volatility amid persistent economic uncertainty.
Sterling dipped slightly by 0.1% to $1.3508 against the U.S. dollar after the release of America’s producer price index (PPI) figures. At the same time, the pound gained 0.1% to trade at €1.1552 versus the euro, highlighting its resilience against the bloc’s currency.
Despite Thursday’s cautious mood, the pound has seen a solid year-to-date performance, rising about 8% since the first week of January. Moreover, the exchange rate remains positioned above the 50-day, 100-day, and 200-day moving averages, underscoring technical strength.
Attention in global markets is now fixed on the release of U.S. consumer price index (CPI) data and the policy direction of the European Central Bank (ECB), both expected later today. Analysts anticipate that headline inflation in the U.S. could rise 2.9% year-on-year in August, with markets pricing in over a 90% probability that the Federal Reserve will implement a 25 basis-point rate cut, according to the CME FedWatch Tool.
Although FX volatility has risen modestly since the start of September, it still lags behind the heightened swings observed earlier in the summer. Geopolitical tensions—including Israel’s strike in Qatar and reports of Russian drones intercepted over Poland—have yet to spark a major currency market reaction.
“U.S. data remain the most likely catalyst for any significant FX market volatility at this point. We expect the August CPI release to print at 0.3% month-on-month, which aligns with consensus,” noted Francesco Pesole, FX analyst at ING.
On Wednesday, the U.S. PPI report revealed weaker-than-expected results, with both headline and core indexes slipping -0.1% month-on-month. July’s data was also revised lower, showing a 0.7% increase compared with the initially reported 0.9%. The sharpest decline came from trade services, which fell -1.7% month-on-month—a measure often used as a proxy for corporate profit margins.
The data suggests that, for now, American firms are absorbing higher input costs tied to tariffs rather than passing them on to consumers. “The risks are tilted to the downside for the dollar today. A relatively soft CPI report could open the door for investors to return to shorting USD positions,” Pesole added.
