US PPI strengthens Fed hawks’ hand as British Pound heads for weekly losses

• After pulling back from 1.3460, GBP/USD is on course for a 0.90% weekly decline.
• At 6.5% YoY, US headline PPI reaches its highest level since 2022.
• Despite stronger expectations of BoE tightening, the probability of a December Fed rate rise nears 90%.

US producer inflation has reached its highest level since 2022, while the British Pound remains broadly steady against the US Dollar on Friday. Trading around 1.3230, Sterling is up nearly 0.05% on the day but remains on course for a weekly decline of almost 0.90%.

GBP/USD comes under pressure as US inflation fuels Fed rate rise expectations

Higher transport and warehousing prices were largely responsible for the October increase in the US Producer Price Index (PPI), which reached 6.5% YoY. Although below forecasts, the figure exceeded September’s 6.3% reading. Excluding items such as food and energy, core PPI held at 5%, unchanged from the previous month and in line with expectations.

Comments from Federal Reserve (Fed) officials are also drawing attention. Austan Goolsbee, President of the Chicago Fed, warned that the inflation figures point to a worsening picture, which “would make the Fed more aggressive.”

According to the CME FedWatch Tool, money markets had assigned a probability of nearly 90% to a 25-basis-point Fed rate rise in December. A larger increase of 50 basis points remained a slim possibility, with a 10% chance that policymakers could opt for that move.

After reaching a weekly peak near 1.3460, GBP/USD turned lower as recent US inflation figures, hawkish remarks from Fed officials and expectations of a possible Fed tightening cycle weighed on the pair.

Thursday’s UK Gross Domestic Product (GDP) figures met expectations, coming after last week’s Bank of England (BoE) rate rise. Market participants are already pricing in an 85% probability of another increase in December.

UK inflation figures will be a focus for traders next week. Across the Atlantic, further appearances by Fed officials are scheduled, while Retail Sales and the minutes from the latest Federal Open Market Committee meeting will take centre stage.

GBP/USD Price Forecast: Near-Term Technical Bias Remains Bearish.

At 1.3236 on the daily chart, GBP/USD continues to show a bearish near-term bias. Spot remains below the latest triple simple moving average (SMA) reading of around 1.3341, as well as former rising trend-line supports near 1.3360 and 1.3606 that now provide overhead resistance. A Relative Strength Index (RSI) reading of 40.6, below the midline, points to continuing downward pressure rather than oversold conditions. Meanwhile, descending resistance lines drawn from 1.3869 and 1.3653 suggest that the broader corrective pattern continues to limit rallies.

The first resistance cluster lies at 1.3341–1.3360, bringing together the triple SMA and the nearest former trend support. Further up, descending resistance is positioned around 1.3508 and 1.3544, before the higher former support zone near 1.3606. The current dataset identifies no clear structural support immediately below 1.3236. A sustained move beneath recent lows would therefore expose the pair to a further decline into fresh territory. Sellers would retain control unless the price regains the 1.3340–1.3360 band and holds above it.

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