British Pound falls below 1.34 as hot CPI puts 50-bps Fed hike in play

• GBP/USD drops over 0.40% to 1.3396 as selling pressure intensifies.
• US Core CPI rises 0.3% MoM, exceeding the 0.2% forecast.
• Waller considers 50-bps hike if Core CPI hits 0.3% MoM.

The Pound Sterling dives over 0.40% against the US Dollar on Tuesday as US inflation suggests the Federal Reserve’s (Fed) job is not done. Fed Governor Waller was hawkish, hinting that a 50-basis-point (bps) hike would be warranted if the core CPI came in at 0.3% MoM, with the data fulfilling his forecast. The GBP/USD trades at 1.3396.

GBP/USD retreats as hotter-than-expected US inflation supports Waller’s case for a larger rate hike

The US Bureau of Labour Statistics (BLS) reported that the Core Consumer Price Index (CPI) for October rose 0.3% month over month, above the 0.2% estimate. Headline CPI retreated from 0.6% in September to 0.4% MoM but remained above forecasts of 0.3%.

Governor Christopher Waller said that the economy is strong, with a stable labour market, but inflation is too high. He said that if October’s inflation showed an improvement, he would go for a 25 bps rate increase, but if the reading is like the last two months, he would go for a 50 bps increase.

Following Waller’s remarks, the odds for a 25 basis points rate increase rose to 85%, while for a 50 bps are at 14%, according to the CME FedWatch Tool.

In the UK, BRC Like-For-Like Retail Sales in October improved from 1% to 1.1% but missed forecasts of 1.2%. Eyes move to the release of the Gross Domestic Product (GDP) figures on Thursday, with estimates that the economy grew 0.7% QoQ in Q3.

Ahead the US economic docket will feature Initial Jobless Claims, housing data and Fed speakers on Thursday.

GBP/USD Price Forecat: Technical outlook

In the daily chart, GBP/USD trades at 1.3376 and remains capped in the near term, with spot holding beneath a tight cluster of the 50-, 100- and 200-day simple moving averages (SMAs) around 1.3453–1.3457. Price is hovering just above a descending trend-line support region near 1.3375–1.3226, suggesting the pair is consolidating within a broader corrective downtrend, while the Relative Strength Index (14) around 51 hints at neutral but stabilizing momentum rather than a decisive bullish turn.

On the topside, initial resistance is seen at the 200-day SMA near 1.3453, followed closely by the 100-day SMA at 1.3455 and the 50-day SMA at 1.3457, where a sustained break would be needed to ease the current cap and open the way toward the higher ascending trend-line barriers near 1.3700 and 1.3868. On the downside, immediate support is provided by the nearby descending trend line at 1.3375, with the lower trend-line floor around 1.3226 acting as the next key level, where a clear drop below would reinforce the bearish bias and expose deeper losses.

(The technical analysis of this story was written with the help of an AI tool. Know more.)