GBP/USD holds near 1.3550 as soft US PPI boosts Fed cut bets

• Sterling hovers around 1.3550 as focus shifts to US CPI and Jobless Claims.
• US PPI cools sharply in August, headline down to 2.6% YoY, core easing to 2.8%, fueling Fed cut speculation.
• BoE expected to hold rates steady at 4%, while UK fiscal challenges cap Sterling's upside potential.

The GBP/USD hoovers around the 1.3550 figure for the third straight day after the latest inflation report in the United States (US) showed that prices paid by producers dipped in August, increasing the chances for an interest rate cut by the Federal Reserve.

Sterling steadies for third day as Dollar weakens on softer producer prices, with traders eyeing key CPI next

The US Bureau of Labor Statistics (BLS) revealed that the Producer Price Index (PPI) in August edged lower from 3.3% to 2.6% YoY. Excluding volatile items like food and energy, the so-called core PPI cooled form 3.7% to 2.8% YoY. Although the data is bearish for the Dollar, looming Consumer Price Index (CPI) figures and Initial Jobless Claims data on Thursday, are awaited by investors who are weighing the chances of a small or big size cut by the Us central bank.

Across the pond, the lack of economic data releases in the UK, keep investors adrift to developments in the US. However, high inflation prints and a difficult outlook for Britain's finances, put a lid on Sterling's advance.

Chancellor Rachel Reeves has been under pressure to keep the finances on track. The Autumn budget announcement is due in November.

Central bank divergence, favors further GBP upside

Next week, the Fed and the Bank of England (BoE) would host its September monetary policy meetings. The former is expected to reduce interest rates by 25 basis points to 4.00%-4.25%. On the contrary, the BoE is foreseen to hold rates unchanged at 4%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD continues to consolidate at around weekly highs reached on September 9 at 1.3590, but buyers failure to decisively clear the 1.3550 area has opened the door for further downside.

The Relative Strength Index (RSI) remains bullish, but as it turns flat, the pair might remain at around 1.3500-1.3550 waiting for US CPI figures.

A breach of 1.3590 will expose 1.3600 and the next key resistance seen at 1.3681, the July 4 peak. On the other hand, a drop below 1.3500, will expose the 20-day SMA at 1.3491, followed by the 50-day SMA at 1.3465.