The British pound declined in European trading on Wednesday against a basket of major currencies, deepening losses for the third consecutive session against the US dollar and hitting a one-week low. The drop came amid continued strength in the greenback ahead of the annual Jackson Hole Economic Symposium.

Expectations for a September rate cut by the Bank of England have eased following the central banks latest policy meeting and a run of strong UK economic data. Investors are now awaiting the release of July inflation figures later today to reassess the outlook.

Price Overview

The pound fell more than 0.2% against the dollar to $1.3462, its lowest level since August 12, from an opening price of $1.3492, after touching a session high at $1.3493.

On Tuesday, the pound lost 0.1% against the dollar in a second straight daily decline, driven by renewed demand for the US currency as a safe-haven asset.

US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session to hit a one-week high of 98.44, reflecting persistent strength in the US currency against a basket of majors and minors. Markets remain focused on Fed Chair Jerome Powells speech at Jackson Hole on Friday, which could shape expectations for a potential rate cut next month.

UK Interest Rates

Following last weeks hawkish Bank of England meeting, traders pared back bets on rate cuts, now pricing in an additional 17 basis points of easing this year.

Current pricing for a 25-basis-point cut at the September meeting stands below 20%.

UK Inflation Data

Later today, investors await key UK inflation readings for July, which are expected to heavily influence the Bank of Englands policy path. The headline CPI is forecast to rise 3.7% year-on-year, slightly up from 3.6% in June, while core CPI is expected to remain steady at 3.7%.

Outlook for the Pound

We at Economies.com expect that if UK inflation prints above market forecasts, expectations for a September BoE rate cut will diminish, supporting a recovery in the pound.