British Pound trades sideways below mid-1.3200s near multi-week low as USD remains bullish

• A firm USD leaves GBP/USD struggling to stage a meaningful rebound.
• Growing expectations of Fed rate rises and Middle East risks keep the USD supported.
• Sterling gains no traction from expectations of a further BoE rate rise in December.

Around 1.3230, GBP/USD is consolidating during Friday’s Asian session, close to its lowest level in more than four weeks as the US Dollar (USD) remains firm.

October’s stronger-than-expected US consumer inflation figures prompted several Federal Reserve (Fed) officials to take a more hawkish stance, reinforcing market expectations of further monetary tightening. Against this backdrop, and with uncertainty persisting in the Middle East, the USD Index (DXY), which measures the Greenback against a basket of currencies, remains close to its April 2025 highs. Traders have also begun to price in the possibility of a sizeable 50-basis-point (bps) Fed rate rise in December. This has driven the benchmark 10-year US government bond yield back above the 5% threshold.

Daly reinforces Fed tightening bias as AI inflation risks persist

At 8.3/10, Fed official Daly’s FXS Speechtracker score is well above the historical average of 6.5/10, reflecting a notably more hawkish tone. Her remarks highlight heightened concern over persistent inflation, notwithstanding optimism about technology-led productivity gains. On AI, the central message is that neither the current technology boom nor the extensive AI pipeline is the main force behind today’s inflation, while their impact on the labour market remains limited. Nevertheless, AI-related price pressures and the prospect of higher inflation in future leave no room for Fed complacency. By highlighting stubborn services inflation, expressing comfort with a September rate rise and favouring further tightening, Daly reinforces a policy approach firmly directed at reducing inflation, even if future productivity gains could ultimately help to restrain prices.

A rise of 1.01 points took the FXS Fed Sentiment Index to 147.55, leaving it firmly in hawkish territory and indicating a stronger tightening bias in recent Fed communications. Together with the high FXS Speechtracker score, this shift suggests markets should continue to price in conditions supportive of the Dollar. Tighter financial conditions are seen as consistent with the Fed’s required policy stance.

In a Truth Social post, President Donald Trump said the US has no need for a deal with Iran and that those days have long since passed. Continued attacks on Saudi Arabia’s energy infrastructure and commercial vessels in the Strait of Hormuz are also sustaining the geopolitical risk premium. This is viewed as a further source of support for the safe-haven Greenback, putting pressure on GBP/USD. Sterling could, however, draw support from expectations that the Bank of England (BoE) will deliver a second consecutive 25 basis point (bps) rate rise at its next policy meeting on 17 December.

With buying interest still absent, positioning for a recovery calls for caution. Those taking a bearish view may now wait for GBP/USD to break below 1.3200 before initiating fresh positions. The pair nonetheless looks set for a second consecutive weekly decline, with spot prices continuing to depend on movements in the USD.

GBP/USD trades under pressure on the 4-hour chart

GBP/USD retains a bearish technical bias

Following the overnight breach of horizontal support at 1.3280, GBP/USD retains a bearish near-term bias below the 200-period Simple Moving Average (SMA) on the 4-hour chart. To relieve pressure on the negative outlook, bulls would need to secure a sustained recovery above the 200-SMA at 1.3315. Without a return above that level, spot prices would remain exposed to further losses.

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