British Pound clings to 1.3300 as UK inflation test threatens recovery

• GBP/USD holds above 1.3300 despite persistent bearish pressure.
• December Fed hike odds reach 91% as Treasury yields climb.
• UK CPI and employment data could reshape November BoE expectations.

The Pound Sterling holds steady against the US Dollar at the start of the week, yet the ongoing downtrend is poised to continue unless this week’s UK inflation data reflects elevated energy prices due to the US-Iran conflict. The GBP/USD holds above 1.3300, up 0.07%.

GBP/USD steadies as rising Treasury yields and December Fed hike expectations limit Sterling's upside

Last week, US inflation data on the consumer and producer side was higher than expected and was noted by the White House National Economic Adviser Kevin Hassett, who said that inflation looks like “it is needing some work,” at CNBC.

Despite this, speculators trimmed their Fed-hawkish bets for the October meeting but seem certain that, in December, the US central bank will increase interest rates by 25 basis points, with odds at 91%, according to Prime Terminal.

In the meantime, the US Dollar Index (DXY), which measures the buck’s performance versus six currencies, gains 0.13% at 101.91. US Treasury yields are also rising, with the US 10-year T-note is up 4.6 bps at 5.127%.

A jump in global yields, due to France’s riots, which sent yields on French debt higher, amid growing unrest over fiscal policy and the next year's election.

In the US, the economic docket is light with Fed speakers entering the blackout period ahead of the October 27-28 meeting. Housing data, the ADP Employment Change 4-week average, jobless claims and S&P Global Flash PMIs could dictate the Greenback’s direction, along with geopolitics.

In the UK, the schedule is busy, with the release of jobs and inflation data on October 20 and 21, respectively, a speech by the Bank of England (BoE) Governor Andrew Bailey and Retail Sales data.

BoE Governor Bailey noted on Friday that energy prices seem to have had “limited wider effects on British prices,” but warned that it’s too soon to “draw firm conclusions”

GDP data from the UK surprised investors, with the economy growing solidly in August. In the meantime, eyes are on the release of the Autumn Budget next week, which poses downside risks to the British Pound if the Chancellor, John Healey, fails to deliver growth without missing the fiscal goals set by his predecessor, Rachel Reeves.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3319, holding a mildly bearish near-term bias as it remains capped beneath a dense cluster of longer-term simple moving averages (50, 100 and 200-day SMA) and a descending trend line around the mid‑1.34s. The pair has slipped back under the most recent break level while the Relative Strength Index (14) hovers just above 50, hinting at only modest upside momentum that so far has not been strong enough to challenge the overhanging resistance structure.

On the topside, initial resistance is seen at the downward trend line coming in near 1.3408, followed closely by the 50, 100 and 200-day SMA cluster around 1.3414, where a daily close above would be needed to ease the current bearish pressure and open the way toward the next ascending trend-line barriers near 1.3612 and 1.3798. On the downside, immediate support aligns with the prior descending resistance line now turned floor around 1.3275, and a break back below this level would expose the pair to a deeper retracement toward earlier cycle lows.

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