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GBP/USD slips as hot US PPI fuels Fed hawkish repricing

March 18, 2026

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GBP/USD drops 0.21% to 1.3320 as US PPI beats expectations across headline and core.
DXY climbs to 99.76 amid reduced Fed rate cut bets and geopolitical risks.
Markets await Fed and BoE decisions, with focus on dot plot and policy outlook.

GBP/USD falls 0.21% on Wednesday following the release of a hot US inflation report, prompting investors to cut their dovish bets on the Federal Reserve. At the time of writing, the pair trades at around 1.3320.

Stronger inflation data and Middle East tensions boost the Dollar, weighing on Sterling

An escalation of the Middle East conflict soured market mood, a tailwind for the US Dollar’s haven appeal. Israel’s attack on Iran’s gas facilities prompted a reaction by Tehran, which said that they will strike the enemy’s infrastructure, according to Al-Jazeera.

The US Dollar Index (DXY), which tracks the Greenback’s performance against six currencies, edges up 0.20% to 99.76 after the US Bureau of Labour Statistics (BLS) revealed that producer-side inflation rose sharply in both headline and core figures.

The Producer Price Index (PPI) in February expanded by 3.4% YoY, exceeding estimates and January’s 2.9% reading. Core PPI, which excludes volatile items, jumped from 3.5% to 3.9% YoY for the same period.

Ahead, traders eye the Federal Reserve’s decision. Powell and Co. are expected to hold rates unchanged while releasing their economic projections for the full year. Money markets would be eyeing the dot plot, in which Fed officials express their expectations for the path of interest rates.

After the release of the monetary policy statement, market participants’ focus would shift to Fed Chair Jerome Powell’s press conference.

Following Powell’s press conference, attention will turn to the Bank of England (BoE), which will also announce its monetary policy decision on Thursday. Traders expect the BoE to keep the Bank Rate at 3.75%, with the first move towards a rate hike expected in March 2027, driven by high energy prices sparked by the Middle East conflict.