GBP/USD drifts lower to near 1.3270 in the early Asian session on Friday. In September, the US Producer Price Index experienced an annual increase of 6.3%. The Bank of England is anticipated to increase interest rates to 4.0% in November, as indicated by a Reuters poll. The GBP/USD pair experiences a decline, reaching approximately 1.3270 in the early Asian session on Friday. The US September Producer Price Index exceeds expectations, bolstering the US Dollar against the British Pound. The speeches from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh will attract significant attention later on Friday. Data released by the Bureau of Labour Statistics on Thursday indicated that the US PPI increased by 6.3% year-over-year in September, marking the largest rise since 2022. This figure followed a rise of 5.6% in August (revised from 5.4%) and exceeded the market consensus of 5.3%. Meanwhile, the PPI increased by 1.3% on a monthly basis, surpassing analysts’ estimate of 0.5%. The PPI excluding food and energy rose by 0.7% on a monthly basis and 5% on a yearly basis, respectively. Both of these readings exceeded expectations. The data had minimal impact on interest rate expectations.
Traders are currently assigning approximately a 29% probability to the likelihood of a Federal Reserve rate increase later this month, as indicated by the CME FedWatch tool. “With a second day in a row of higher-than-expected inflation numbers, it seems the Fed will have no choice but to raise rates again this year,” said Chris Zaccarelli. “While we don’t expect them to raise rates later this month (because it is so close to the mid-term election), we do think that they will increase the Fed Funds rate another [quarter point] in December,” Chris added. The UK economy exhibited an unexpected expansion in August, as Gross Domestic Product increased by 0.1% month-on-month, in contrast to the 0.4% growth recorded in July. This figure exceeded the anticipated 0.1% contraction. The BoE is poised to increase the Bank Rate to 4.0% in November, marking the first rise in over three years, as indicated by a majority of economists surveyed. Analysts highlight that “dip buyers lift spot back above 1.32 pivot, supported by lower US yields,” underscoring the importance of this level in the current GBP/USD trading range. They add that “above forecast UK GDP adds to case for November BoE hike,” reinforcing the constructive near-term backdrop for the Pound as markets lean further toward additional policy tightening by the BoE.
Fed’s Goolsbee scores 7.1/10 on the FXS Speechtracker, modestly above the 6.7/10 historical average, signaling a slightly more impactful appearance relative to the established baseline. The description of the latest data as “a discouraging month in terms of inflation” introduces a clear hawkish tilt, but the conditional optimism that inflation drivers could fade “in short order” tempers the tone, while the warning that AI-driven overheating demand would be “more disturbing” and must be addressed underscores a readiness to tighten if structural demand pressures emerge. Overall, the mix of concern over recent inflation and conditional optimism keeps the stance cautiously hawkish, with markets likely to see elevated sensitivity in Dollar pricing to incoming price and AI-related demand data. The FXS Fed Sentiment Index decreased by 0.41 points to 127.51, reflecting a slight retreat in perceived hawkishness while still remaining well above the neutral threshold of 100. This configuration indicates that, notwithstanding the minor moderation in tone, the overarching communication from the Fed remains distinctly hawkish.
Furthermore, Goolsbee’s above-baseline FXS Speechtracker score bolsters the perspective that policy risks are still tilted toward tighter conditions rather than an impending dovish shift. In the daily chart, GBP/USD is positioned beneath the 100-day simple moving average while remaining above the middle band of the Bollinger Bands (20, 2), resulting in a price that is confined within a mid-range consolidation. The Relative Strength Index (14) at 47.0 remains in neutral territory, indicating an absence of definitive directional momentum as the pair fluctuates between proximate band support and upper trend resistance. On the topside, initial resistance is aligned with the Bollinger upper band at 1.3335, with a stronger barrier at the 100-day SMA near 1.3390, which caps the broader bullish attempts. On the downside, immediate support emerges at the Bollinger middle band around 1.3250, ahead of a deeper cushion at the lower band near 1.3160, where a break would open the way for a more pronounced bearish extension.
