GBP/USD has seen a decline as increasing oil prices raise inflation worries, thereby strengthening the US Dollar amid expectations of a Federal Reserve rate hike. BoE hawk Catherine Mann cautioned that UK inflation may reach 4% by the end of the year, reinforcing the case for sustained elevated interest rates. Elevated energy costs in the UK, coupled with ongoing price pressures, are solidifying market anticipations for sustained higher interest rates from the Bank of England. GBP/USD experiences a decline following a period of modest gains the prior day, currently trading near 1.3250 during the Asian session on Wednesday. The pair depreciates as the US Dollar gains ground, driven by rising oil prices that could revive inflation concerns and expectations for further Federal Reserve rate hikes.
Traders are anticipating the release of the Federal Open Market Committee Meeting Minutes scheduled for later today. However, the downside for the GBP/USD pair may be limited as diminishing expectations for Federal Reserve rate hikes, prompted by last week’s weaker US jobs data, exert pressure on the Greenback. According to the CME FedWatch tool, interest-rate swaps indicate that traders are assigning an approximately 20% probability to the Federal Reserve raising benchmark borrowing costs at its upcoming October meeting. Strategists observe that “G10 currencies continue to trade in mixed fashion vs. the USD,” with “a majority showing gains into Tuesday’s NA open.” This uneven performance underscores the still-fragmented nature of Dollar trading, even as more pairs edge higher into the North American session.
Meanwhile, the British Pound could find support as elevated energy costs and persistent inflation concerns reinforce expectations for Bank of England interest rates to remain higher for longer. BoE policymaker Catherine Mann emphasised these risks on Tuesday, cautioning that inflation exceeding the central bank’s 2% target seems ingrained in the economy and could approach 4% at the year’s end amid standard wage negotiations. Mann, who has consistently advocated for a 25-basis-point rate increase to 4% since July, observed that these wage dynamics could contribute to additional price pressures. In the daily chart, GBP/USD is positioned at 1.3250, maintaining a bearish near-term outlook as the price remains constrained below both the nine- and 50-day Exponential Moving Averages.
The pair continues to decline, distancing itself from the overhead averages, while the 14-day Relative Strength Index at 39.3 remains below the midline, indicating ongoing downside pressure rather than a forthcoming bullish reversal. On the topside, immediate resistance is observed at the nine-day EMA at 1.3259, which protects the trajectory toward the more substantial technical barrier represented by the 50-day EMA at 1.3387. As long as GBP/USD remains below this EMA cluster, any rallies are expected to be met with selling pressure, and the overall sentiment will continue to be bearish unless a daily close above 1.3387 begins to undermine the existing downtrend structure.
