GBP/USD Hits Three-Month High After UK Inflation Jumps to 2.9% in July

Sterling climbed to a three-month high against the dollar on Thursday after UK consumer price inflation accelerated to 2.9% in July, up from a 15-month low of 2.6% in June, driven largely by a 13% hike in Ofgem's energy price cap. The reading matched forecasts and marked the highest inflation rate since March, while core inflation held steady at 2.6%. The data reinforced expectations that the Bank of England will need to keep policy restrictive for longer, lending support to the pound.

The dollar was simultaneously under broad pressure as long-term US Treasury yields fell, a move amplified by the Treasury Department's decision to expand buyback operations for securities with maturities of 10 to 30 years to support market liquidity. EUR/USD held just below 1.1700, near its strongest August levels, as fading Federal Reserve rate-hike expectations weighed on the greenback. The People's Bank of China offered a firmer signal for the yuan, setting its USD/CNY daily reference rate at 6.7808, stronger than the prior session's fix of 6.7854.

The outlook for GBP/USD and other dollar pairs now hinges on upcoming economic data from both sides of the Atlantic.