British Pound steadies below 1.3450 ahead of US CPI data
- GBP/USD flatlines near 1.3445 in Tuesday’s early Asian session.
- Traders see 84.0% odds of a Fed hike in December.
- BoE’s Bailey says upside inflation risks remain a concern.
The GBP/USD pair holds steady around 1.3445 during the early Asian trading hours on Tuesday. Traders prefer to wait on the sidelines ahead of US Consumer Price Index (CPI) inflation data later in the day. Also, Bank of England (BoE) policymaker Sarah Breeden is set to speak.
Stronger-than-expected US Nonfarm Payrolls (NFP) data have reinforced expectations that the US Federal Reserve (Fed) could keep interest rates higher for longer. This, in turn, could lift the Greenback in the near term.
Markets are now pricing in nearly an 84.0% chance that the Fed will raise rates in December, up from 72.8% before the US jobs report, according to the CME FedWatch tool.
The US CPI inflation report will take center stage later on Tuesday. The headline CPI is expected to show a rise of 0.3% MoM in October. The core CPI, which excludes volatile food and energy costs, is forecast to show an increase of 0.2%.
The report will not include an annual reading for October CPI because of the government shutdown a year ago, which prevented the BLS from collecting some data and compiling a full index level.
Last week, the BoE lifted its benchmark interest rate by 25 basis points (bps) to 4.00%, marking its first rate increase in over three years. BoE Governor Andrew Bailey emphasized the war in the Middle East, which is pushing up energy prices, as the main factor in deciding future rates. Markets price in three more hikes by the end of next year, more than most economists expect.
UK rates steady as markets eye Bailey and key 3 data
Strategists at Societe Generale note that the UK rates market has opened on a stable footing, with the "10y IRS opens unchanged at 4.70% after holding 4.69% (100dma) last week." They identify "support 4.58%, resistance 4.78%," framing the immediate technical range as investors await policy signals. The bank highlights that Governor Bailey "speaks in Zurich later today, first intervention since the MPC rate increase week," a appearance that could help shape expectations around the BoE’s reaction function.
On the data front, Societe Generale flags that "prel 3Q GDP on Thursday" will be a key domestic highlight, with the bank’s own "SG forecast 0.7% qoq." More broadly, they describe a busy global calendar in the "week ahead," pointing to "US CPI, PPI, Fed speak incl Waller and Williams. EU 3Q GDP second read. UK prel 3Q GDP. China trade balance. CPI for Mexico, Norway, Czech Republic, Hungary, India," underscoring the dense run of releases that could influence global rate and FX markets.
BoE’s pill opens door to 2026 rate cuts as outlook uncertainty rises
Pill’s latest remarks score 4.2/10 on FXS Speechtracker, notably below the historic 6.4/10 baseline, signalling a softer and less conviction-driven tone. By stressing that “nothing is baked in” for next year and that there is “no preset upward path” for rates from spring, the speech marks a dovish shift versus past guidance that leaned more firmly toward keeping policy restrictive.
The explicit acknowledgement that Bank Rate could stay on hold or even fall if growth stalls, and that the key determinant will be margin squeeze on companies, reinforces a data-dependent and growth-sensitive stance. For GBP, this combination of heightened uncertainty and openness to cuts tilts risks toward a weaker path, as markets are encouraged to price out a sustained tightening bias and to focus instead on downside growth scenarios.
Technical Analysis: GBP/USD keeps a bullish vibe above the 100-day SMA
In the daily chart, GBP/USD maintains a modest bullish bias as spot holds above the 100-day simple moving average (SMA) and the Bollinger middle band, suggesting underlying demand on shallow pullbacks. The Relative Strength Index (RSI) at roughly 57 stays in positive territory, hinting that upside momentum remains constructive while price consolidates just below the upper Bollinger band.
On the topside, immediate resistance emerges at the upper Bollinger band near 1.3500, and a clear break above this ceiling would open the way for a stronger advance. On the downside, initial support is seen at the 100-day SMA around 1.3400, followed by the Bollinger midline near 1.3370, while the lower band around 1.3238 marks a deeper support zone if the current bullish structure were to unwind.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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