British Pound defies US yields surge as BoE hike bets build

• GBP/USD edges higher despite surging Treasury yields and firmer Dollar.
• Oil rally strengthens BoE tightening bets as inflation risks rise.
• Yield-curve inversion concerns grow as Fed hike expectations intensify.

The Pound Sterling registers modest gains of 0.18% even as US Treasury yields soar, with the US 10-year T-note rising over 10 basis points, underpinning the Greenback. The GBP/USD trades at 1.3252.

Sterling holds gains as energy shock revives UK tightening expectations

At the beginning of the week, the pair rose as high as 1.3275, but as US-Iran peace hopes faded and Oil prices rose, the US Dollar is recovering ground as depicted by the US Dollar Index (DXY).

The DXY, which measures the performance of the buck against six currencies, is up 0.15% to 101.18, near a three-day high. As mentioned, West Texas Intermediate (WTI), the US crude benchmark, is up more than 3% at $95.41 per barrel.

Over the weekend, US President Donald Trump declined Iran's proposal to reopen the Strait of Hormuz and bring an end to the Middle East conflict. He warned that attacks could resume after the US midterm elections, pushing Oil prices even higher.

US bond yields are also on the move, with the US 10-year benchmark note rising as high as 5.261%, as investors grow confident that the Federal Reserve will continue its tightening cycle.

Worth noting, a Bloomberg article, “An inversion of the US yield curve becomes new risk as Fed hikes,” noted that bond traders are demanding a higher premium on the 2-year note, narrowing the yield differential with the 10-year, a prelude to a possible inversion of the curve. This means that when investors demand a higher short-term yield, they are pricing in rate hikes by the Fed, which would usually slow the economy as the Fed tames high inflation.

Historically, yield inversion has proved to be a good signal for forecasting recessions, dating back to 1960. But this decade failed during the COVID pandemic.

Aside from this, Sterling was boosted as investors saw rising energy prices in the UK, as a reason to expect further tightening by the Bank of England. (BoE). Last week, Governor Bailey said that high energy prices would make the bank work harder to keep interest rates unchanged. Recently, Deputy Governor Dave Ramsden commented that if upside inflation pressures build, it could be grounds for raising rates.

In the meantime, traders are eyeing the release of the UK Autumn Budget on October 28. UK’s finance minister John Healey is set to speak at the Labour Party's annual conference on Monday.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3255, keeping a bearish near‑term bias as spot holds below the cluster of key moving average and trend‑line levels. The 50/100/200-day simple moving average (SMA) pack converging near 1.3462 now acts as overhead resistance, while several previously supportive rising trend lines, broken around 1.3528 and 1.3732, reinforce the notion of a market capped beneath former structural floors. The Relative Strength Index (14) at about 30 suggests the pair is approaching oversold territory, hinting that downside momentum may be stretched even as price remains pressured under these topside barriers.

On the topside, initial resistance aligns with the downtrend line break zone near 1.3322, followed by the more recent descending resistance trend line around 1.3440. Above there, the confluent 50/100/200-day SMAs at roughly 1.3462 form a dense cap, with the higher broken support trend levels at 1.3528 and 1.3732 marking subsequent barriers if a corrective rebound extends. On the downside, the lack of nearby mapped structural supports leaves the pair vulnerable to further slippage, with traders likely to look for a fresh basing pattern or new horizontal lows before considering a more sustained recovery.

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