British Pound consolidates near multi-week low, below mid-1.3200s vs bullish USD

• GBP/USD struggles to register any meaningful recovery amid a bullish USD undertone.
• Firming Fed rate hike expectations and Middle East risks continue to support the USD.
• Bets for another BoE rate hike in December fail to provide any impetus to the Streling.

The GBP/USD pair is seen consolidating around the 1.3230 region during the Asian session on Friday, trading near its lowest level in more than four weeks amid a bullish US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands firm near April 2025 tops amid firming Federal Reserve (Fed) rate hike expectations and Middle East uncertainties. Following hotter-than-expected US consumer inflation data for October, several Fed officials adopted a more hawkish tone and reaffirmed market bets for further policy tightening. Moreover, traders have also started pricing in the possibility of a jumbo 50-basis-point (bps) Fed rate hike in December, pushing the yield on the benchmark 10-year US government bond back above the 5% threshold.

Daly leans hawkish as AI inflation risks keep Fed tightening bias intact

Fed’s Daly delivers a notably more hawkish tone, with an FXS Speechtracker score of 8.3/10, well above the 6.5/10 historical average, underscoring elevated concern about persistent inflation despite optimism on technology-driven productivity. The key AI remark stresses that while the current technology boom and deep AI pipeline are not the primary drivers of today’s inflation and have limited labor market impact, AI-fueled price pressures and the risk of greater future inflation mean the Fed cannot be complacent. Daly’s emphasis on sticky services inflation, comfort with a September hike, and a bias toward further tightening reinforces a policy stance focused squarely on bringing inflation down even as potential future productivity gains could eventually be disinflationary.

The FXS Fed Sentiment Index rose by 1.01 points to 147.55, keeping the gauge firmly in hawkish territory and signaling a stronger tightening bias across recent Fed communication. This move, combined with the elevated FXS Speechtracker score, suggests that markets should continue to price a supportive backdrop for the Dollar, with tighter financial conditions seen as aligned with where the Fed needs to be.

Meanwhile, President Donald Trump said in a Truth Social post that the US does not need a deal with Iran, adding that those days have long since passed. Adding to this, continued attacks on Saudi Arabia's energy infrastructure and commercial ships in the Strait of Hormuz keep the geopolitical risk premium in play, which is seen as another factor underpinning the safe-haven Greenback and weighing on the GBP/USD pair. However, bets of a back-to-back 25 basis point (bps) rate hike by the Bank of England (BoE) at its next policy meeting on December 17 could support the British Pound (GBP).

The lack of buying interest, however, warrants some caution before positioning for any recovery. Meanwhile, bearish traders might now await a break below the 1.3200 mark before placing fresh bets on the GBP/USD pair. Nevertheless, spot prices seem poised to register losses for the second straight week and remain at the mercy of USD price dynamics.

GBP/USD 4-hour chart

Technical Analysis

The GBP/USD pair keeps a bearish near-term tone beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart and following the overnight breakdown below the 1.3280 horizontal support. Bulls would need a sustained recovery above the 200-SMA at 1.3315 to ease negative outlook pressure. Meanwhile, failure to reclaim this level would leave spot prices vulnerable to continued downside extension.

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