British Pound slips due to stable US Dollar, rising oil prices

• GBP/USD struggles amid a strong US Dollar and surging Treasury yields.
• Markets price in a 78.3% chance of a Fed rate hike in December despite an October hold.
• Rebounding oil prices drive UK gilt yields to multi-year highs, threatening economic growth.

GBP/USD remains subdued for the second successive day, trading around 1.3210 during the Asian hours on Thursday. The pair inches lower as the US Dollar (USD) holds its ground, bolstered by elevated US Treasury bond yields that have climbed near their highest levels since 2002.

Meanwhile, a recent spike in oil prices has reignited concerns over persistent inflation, strengthening the prospect of higher interest rates. Traders are now looking toward upcoming speeches from Federal Reserve (Fed) officials, including Christopher Waller and Alberto Musalem, for further directional cues.

Federal Reserve policy expectations continue to anchor sentiment. According to the minutes from the Fed's last meeting, policymakers were united in supporting their September rate hike, with a majority agreeing that an additional increase by year-end would be appropriate. While markets largely anticipate the central bank will keep rates on hold at its October policy meeting, CME's FedWatch tool indicates traders are still pricing in a 78.3% probability of a rate hike in December.

The British Pound (GBP) is confronting its own set of headwinds. The rebound in oil prices has intensified UK inflation concerns, reinforcing expectations that interest rates will remain higher for longer. This backdrop has pushed UK gilt yields to multi-year highs, adding pressure to the economic outlook and weighing on broader UK growth prospects.

Strait of Hormuz security risks mount as tanker attacks rise

Strategists at DBS point to escalating security risks in the Strait of Hormuz, noting that, according to the UK Maritime Trade Operations, there have been “9 attacks already this month, which is half of September’s total.” They highlight that this sharp increase in incidents underscores the growing vulnerability of tanker traffic through the key chokepoint and is helping to sustain the recent firming in Brent prices, even in the face of coordinated reserve releases by the G7. In turn, DBS argues that sentiment towards Oil-sensitive Asian currencies such as INR, IDR and THB is likely to remain soft against this backdrop of heightened geopolitical tension and supply-route disruption.

Technical Analysis:

In the daily chart, GBP/USD trades at 1.3210, keeping a bearish near-term tone as price holds below both the short-term nine-period exponential moving average (EMA) at 1.3243 and the medium-term 50-period EMA at 1.3379. The alignment of these EMAs above spot suggests upside remains capped, while the Relative Strength Index (14) at 36.16 hovers just above oversold territory, hinting at persistent but not extreme selling pressure.

On the topside, immediate resistance is seen at the nine-period EMA near 1.3243, followed by a more significant barrier at the 50-period EMA around 1.3379, where any recovery would likely stall unless momentum improves markedly. With no clear technical support levels derived from the current dataset, the pair appears vulnerable to further downside, leaving traders focused on intraday price action and sentiment shifts for potential stabilization signals.

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