The British Pound edges higher above the 1.3350 level, even as growing expectations of further Federal Reserve rate hikes continue to support the US Dollar.

GBP/USD ticks up to around 1.3385 during Thursday’s Asian trading session. Rising expectations for additional US interest rate hikes, fueled by stronger-than-expected economic data, continue to support the US Dollar. Meanwhile, officials from the Bank of England (BoE) have indicated that the central bank is in no hurry to tighten monetary policy further.

The GBP/USD pair extends its recovery and climbs toward the 1.3385 area during Thursday’s Asian session. However, gains may remain capped as investors increasingly expect US interest rates to stay elevated for longer. Market participants are also adopting a cautious stance ahead of the release of the US Producer Price Index (PPI) later in the day.

Strong US labor market figures and persistent inflation pressures have reinforced the Federal Reserve’s higher-for-longer policy outlook, providing support for the US Dollar and limiting upside potential for GBP/USD.

According to the CME FedWatch Tool, markets now assign a 43.7% chance of a 25-basis-point rate hike in December, a significant increase from roughly 14% just one month ago.

Attention now turns to the upcoming US PPI report, which could offer fresh clues about the Fed’s policy trajectory under Chairman Kevin Warsh. Several major financial institutions have already pushed back their expectations for rate cuts, with Goldman Sachs forecasting that the Fed will keep rates unchanged through 2026 and not begin easing until 2027.

In the UK, Bank of England policymaker Alan Taylor recently stated that current interest rates are already restrictive enough and that additional tightening is unnecessary, despite inflationary risks linked to the Iran conflict. Meanwhile, BoE Governor Andrew Bailey reiterated last week that the central bank is “in no rush” to raise rates.

Traders are now looking ahead to Friday’s UK monthly GDP figures, which could provide further insight into the outlook for the UK economy and the future path of BoE monetary policy.