GBP/USD Recovers After US CPI as Stronger UK Growth Supports Sterling

By Usman Ahmed September 11, 2026, 10:55 am • Posted in Forex

The Pound Sterling (GBP) edged higher against the US Dollar (USD) on Friday, recovering from an initial decline triggered by the latest US inflation report. GBP/USD briefly fell toward 1.3470 after the data release but later rebounded to around 1.3524, gaining approximately 0.10% on the day.

US Consumer Price Index (CPI) data showed inflation rising 0.4% month-on-month in August and 3.4% year-on-year, with both figures matching market expectations. Core CPI, which excludes food and energy, increased 0.3% monthly, slightly above the 0.2% forecast. However, annual core inflation eased to 2.4% from 2.5% previously, broadly matching expectations.

The stronger monthly core reading initially boosted the Dollar, but the reaction quickly faded as major currencies recovered. The US Dollar Index remained near 99.00, marginally lower on the day.

Markets have significantly increased expectations for a Federal Reserve rate hike next week. Pricing now indicates an 88% probability of a 25-basis-point increase, taking the Fed funds target range to 3.75%-4.00%, compared with roughly 60% the previous day.

Meanwhile, weaker US consumer confidence could limit sustained Dollar strength. The University of Michigan’s September sentiment index dropped to 47.8 from 51.7, missing expectations for 51.0. One-year inflation expectations also jumped to 4.6% from 4.0%, while five-year expectations increased slightly to 3.4%.

Sterling received additional support from surprisingly strong UK economic data. GDP expanded 1.6% year-on-year in July, beating the 1.2% forecast and accelerating from 1.1%. Monthly growth reached 0.4%, well above expectations for no growth.

Markets expect the Bank of England to keep rates unchanged, with Governor Andrew Bailey indicating that further tightening is not imminent. Attention now turns to next week’s Fed decision on Wednesday and BoE meeting on Thursday.