GBP/USD tests fresh multi-week highs ahead of Fed & BoE double-header

• GBP/USD tested its highest bids in ten weeks on Monday.
• The US Dollar fell across the board as investors gear up for a key Fed rate call this week.
• The BoE is also due for its own interest rate decision, but no rate moves are expected.

GBP/USD caught another tentative bullish leg higher on Monday, testing above 1.3600 for the first time since July. The US Dollar (USD) backslid across the board to start the fresh trading week, with investors gearing up for a critical interest rate call from the Federal Reserve (Fed).

Traders will be looking to see if the Fed meets or exceeds market expectations for rate cuts through the remainder of the year when the Summary of Economic Projections (SEP), also known as the 'dot plot' of policymakers' rate expectations, is also released during Wednesday's rate call. Markets are betting that the Fed will deliver three rate cuts before the end of the year, with rate markets pricing in nearly 75% odds that the Fed will cut rates by 75 basis points before January, according to the CME's FedWatch Tool.

BoE expected to stand pat, UK CPI equally unremarkable

The Bank of England (BoE) is also expected to deliver its own interest rate decision on Thursday, but the UK's central bank is broadly expected to vote 7-to-2 in favor of keeping rates where they are for the time being. UK Consumer Price Index (CPI) inflation data is also due on Wednesday, and is expected to show a slight acceleration in inflation pressures, with annualized headline CPI inflation forecast to clock in around 3.9% YoY versus the previous period's 3.8%. Core UK CPI inflation over the same period is expected to tick down to 3.6% from 3.8%.

US Retail Sales figures for August are due on Tuesday, but overall impacts are likely to be muted as markets keep both eyes locked on the Fed's rate call on Wednesday. Monthly Retail Sales figures are expected to ease to 0.3% MoM from 0.5%. While markets are unlikely to react strongly, backsliding Retail Sales volumes will be the cherry on top of slumping jobs data and stubborn inflation metrics as recession fears continue to grow.

GBP/USD daily chart