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British Pound strengthens after US CPI surprises to the downside

July 14, 2026

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GBP/USD rises following softer-than-expected US inflation data.
Traders scale back near-term Fed rate-hike bets, weighing on the US Dollar and Treasury yields.
Renewed US-Iran tensions and rising Oil prices keep inflation risks alive.

The British Pound (GBP) strengthens against the US Dollar (USD) on Tuesday after US inflation data surprised to the downside, reducing expectations of a near-term Federal Reserve (Fed) interest rate hike. At the time of writing, GBP/USD trades around 1.3415, up nearly 0.50% on the day and hovering near a one-month high.

The US Consumer Price Index (CPI) fell 0.4% MoM in June, following a 0.5% rise in May. The reading came in below the forecast of a 0.1% decline. Annual inflation eased sharply to 3.5% from 4.2%, below the 3.8% forecast.

Core CPI, which excludes volatile food and energy prices, was flat on a monthly basis, missing expectations for a 0.2% increase. The annual core rate slowed to 2.6% from 2.9%, below the 2.8% forecast.

In reaction to the data, traders quickly scaled back Fed rate-hike bets, pushing the US Dollar and US Treasury yields lower. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 100.70, retreating from an intraday high of 101.32.

According to the CME FedWatch Tool, the probability of a July hike fell to 16% from 40% before the CPI release, while the odds of a September increase eased to 60% from 74%.

However, the softer inflation figures could prove temporary, as the decline was largely driven by lower energy prices following last month’s interim peace deal between the US and Iran.

With tensions rising again and Oil prices moving higher, inflation risks remain alive, keeping the possibility of a Fed rate hike later this year on the table.

Traders now await Fed Chair Kevin Warsh’s congressional testimony, along with speeches from Fed officials Michael Barr, Austan Goolsbee and Lisa Cook.