GBP/USD advances to approximately 1.3230 during the early hours of Thursday’s Asian session. Hotter-than-anticipated CPI inflation figures have rekindled expectations for a Federal Reserve interest rate increase later this month. BoE’s Pill expresses scepticism regarding the market’s pricing of four rate hikes. The GBP/USD pair strengthens to approximately 1.3230 in the early Asian session on Thursday. The US Dollar weakens against the British Pound despite hotter-than-expected US Consumer Price Index inflation data. Traders are poised for the release of the monthly UK Gross Domestic Product, which will be succeeded by the US Producer Price Index and Retail Sales data later on Thursday. The headline US CPI increased by 0.6% month-over-month in September, following a 0.4% rise in August, as reported by the Labour Department’s Bureau of Labour Statistics on Wednesday. On an annual basis, the headline CPI inflation increased to 3.7%, rising from 3.4% in the prior assessment. Traders currently assign a 75.1% probability that the Federal Reserve will maintain its current interest rates during the upcoming meeting on October 27-28, an increase from the 53% observed a month prior. Additionally, they are factoring in approximately 79 basis points of tightening by the end of 2027, as indicated by the CME FedWatch Tool. On the UK’s front, Bank of England Chief Economist Huw Pill expressed scepticism on Wednesday regarding the market’s expectation of four increases to borrowing costs by the BoE over the next year.
Nonetheless, several policymakers cautioned that rates may need to increase if the conflict persists. On Tuesday, BoE Governor Andrew Bailey highlighted that the pressure on broader inflation has thus far remained subdued, “but the longer this goes on, the harder it gets.” Markets are assigning a high probability to a quarter-point rate hike by the MPC at its upcoming meeting in November, with expectations for three additional increases by September 2027, as reported. Strategists note that Sterling is “moderately firmer against the USD,” with gains “merely in line with its core major peers” as policy and growth signals underpin the currency. They highlight comments from BoE MPC member Greene, who said that “faster UK economic growth supported the outlook for tighter monetary policy,” while the IMF has “upgraded the UK growth outlook moderately to 1.3% (from 1.0%) earlier.” The data backdrop will be in focus later this week, with “August GDP data…due Thursday (along with other growth indicators and trade data).” From a technical perspective, Scotiabank describes the GBP/USD setup as “Neutral – Cable has carved out a well-defined trading range over the past couple of weeks, with firm support emerging below 1.32 while gains have been capped around the upper 1.32/low 1.33 range.”
They add that “trend momentum is neutral on the intraday chart, supporting the outlook for more, sideways movement,” and while “broader bearish pressure remains intact” it “may be moderating.” Key levels remain in focus, with “key support is 1.3140/50” cited as an important downside marker. BoE’s Pill conveys a moderately hawkish message, achieving a 7/10 on the FXS Speechtracker, which is slightly below the historic average of 7.4/10. While the resilience in UK output and the labour market is recognised, the notion of runaway growth is tempered. The scepticism regarding the market’s pricing of four hikes over the next year, coupled with the necessity for more concrete evidence to substantiate 100bps of tightening, indicates a cautious approach toward the pace of further rate increases rather than an urgent call for aggressive measures. Comments indicating that an earlier move would have demonstrated the BoE was not merely “holding and hoping,” and that it is misguided to refrain from reacting to uncertainty, highlight a preference for data-driven tightening in response to the persistent underlying UK inflation that did not decrease sufficiently prior to the Iran shock. Overall, the speech exhibits a somewhat hawkish stance regarding inflation risks, yet it moderates expectations for swift rate increases in the UK. This dynamic may limit the immediate appreciation potential for the Pound while simultaneously establishing a baseline for rate expectations.
In the daily chart, GBP/USD maintains a bearish near-term outlook as the spot price remains below the 100-day simple moving average and beneath the Bollinger middle band. Price is maintaining its position above the lower Bollinger band, indicating that downside pressure is alleviated but not entirely depleted. Meanwhile, the Relative Strength Index (14) at approximately 42.9 remains below the neutral 50 threshold, suggesting a continuation of weak momentum rather than indicating oversold conditions. On the topside, initial resistance emerges at the Bollinger middle band near 1.3255, ahead of a secondary barrier at the upper Bollinger band around 1.3360, with the 100-day SMA at 1.3390 reinforcing a broader supply zone above. On the downside, the lower Bollinger band at 1.3145 serves as the initial significant support, and a decisive breach below this level would probably pave the way for additional weakness in the pair.
