The British pound rose slightly in European trading on Friday against a basket of global currencies, heading toward its first gain in four sessions against the US dollar, supported by a pause in the greenbacks recent rally in the foreign exchange market.

Following upbeat economic data from the United Kingdom, doubts increased about the likelihood of a Bank of England rate cut in November. To reassess these expectations, investors are awaiting key inflation data due later today.

Price Overview

Todays pound exchange rate: The pound rose 0.1% to $1.3380 from the opening level of $1.3371, after hitting a low of $1.3364.

On Tuesday, the pound fell 0.3% against the dollar, marking its third straight daily loss, as investors favored the US dollar as the best alternative investment.

US Dollar

The dollar index fell 0.1% on Wednesday, retreating from a one-week high and heading for its first loss in four sessions, reflecting a pause in the US currencys advance against a basket of global peers.

This pullback came amid expectations that the US government shutdown could continue into November, after President Donald Trump rejected a request from senior Democratic lawmakers on Tuesday to meet before the end of the ongoing three-week shutdown.

UK Interest Rates

Recent data from London showed that average wages in the UK rose at the fastest pace in three months in August, while the British economy grew better than expected during the same period.

As a result, market pricing for a 25-basis-point rate cut by the Bank of England at its November meeting dropped below 50%.

UK Inflation Data

To reprice current rate expectations, investors are awaiting key UK inflation figures for September, which are expected to have a strong impact on the Bank of Englands monetary policy outlook.

At 07:00 GMT, the overall Consumer Price Index (CPI) is expected to rise 4.0% year-on-year in September, up from 3.9% in August, while the core CPI is forecast to rise 3.7% year-on-year, up from 3.6% the previous month.

Outlook for the British Pound

According to our estimates here at Economies.com, if UK inflation data come in above market expectations, the likelihood of a Bank of England rate cut before year-end will decrease potentially leading to further gains for the pound against a basket of major currencies.