GBP/USD slips as Dollar steadies ahead of Fed, BoE meetings

• GBP/USD eases after daily high of 1.3580, as Dollar recovers despite softer US sentiment and sticky inflation.
• Fed expected to cut 25 bps next week, with SEP clarifying forward guidance; Deutsche Bank sees three cuts in 2025.
• UK GDP stagnates in July, while BoE likely to hold rates at 4%, narrowing policy divergence with Fed.

The Pound Sterling retreats during the North American session by a modest 0.10% on Friday as the Greenback recovers some ground, after a week that witnessed US inflation remains steady above the Fed's 2% goal but controlled. The GBP/USD trades at 1.3556 after hitting a daily high of 1.3580.

Sterling retreats 0.10% after US inflation steadies and consumer sentiment weakens, with focus shifting to central banks

The latest consumer and producer price inflation in the US provided a green light to the Fed to resume its easing cycle as prices, although they remain high, remain below the 3% threshold. Next week, the Federal Reserve is expected to reduce rates by 25 basis points and the likelihood of providing forward guidance about policy will be clarified by the latest Summary of Economic Projections (SEP).

Banks like the Deutsche Bank expect the Fed to cut interest rates by 25 bps in all three meetings this year, meaning that the Fed funds rate will reach the 3.50%-3.75% range.

Data from the US showed that Consumer Sentiment fell to its lowest level since June in September, revealed the University of Michigan. The Consumer Sentiment Index dipped from 58.2 to 55.4. Inflation expectations for one year rose from 3.5% to 3.9% and for five years were unchanged at 4.8%.

In the meantime, the UK economic docket announced that Gross Domestic Product (GDP) in the UK stagnated, remaining unchanged in July, after growing 0.4% MoM in June, revealed the Office for National Statistics (ONS).

Next week, the Bank of England (BoE) will host its monetary policy meeting, and it is foreseen to leave the Bank Rate unchanged at 4%. This will reduce the interest rate differential and boost the prospects of the British Pound.