• The Pound Sterling jumps to near 1.3180 against the US Dollar as UK core inflation rose faster than expected in August.
• UK core CPI grew by 3.6%, while the headline inflation was stable at 2.2% as expected.
• The Fed seems prepared to announce its first interest-rate cut in more than four years.

The Pound Sterling (GBP) gains against its major peers in Wednesday’s London session as the United Kingdom (UK) inflation data for August came in hotter than expected. The Office for National Statistics (ONS) reported that the core Consumer Price Index (CPI) – which excludes volatile items such as food, energy, oil and tobacco – rose by 3.6%, more than the 3.5% estimated and accelerating from 3.3% in July.

Services inflation, a closely watched indicator by Bank of England (BoE) officials, rose sharply to 5.6% from 5.2% in July. This acceleration in inflation could force traders to pare back bets supporting one more interest rate cut by the Bank of England (BoE) in the remainder of the year.

Headline inflation, meanwhile, rose by 0.3% and 2.2% on a monthly and annual basis, respectively, meeting analysts' expectations.

Going forward, investors will focus on the BoE’s monetary policy announcement on Thursday. Before inflation data came out, markets were already expecting the BoE to leave interest rates unchanged at 5%. With August data signaling that inflation remains stubborn, market expectations for rates remaining at their current levels by the year-end may increase.