Below 1.3450: British Pound holds steady ahead of US CPI release

• 1.3445: GBP/USD trades little changed early in Tuesday’s Asian session.
• 84.0% probability of a December Fed rate increase is priced in by traders.
• Upside inflation risks continue to worry BoE Governor Bailey.

GBP/USD is steady near 1.3445. Early Asian trading on Tuesday sees traders staying on the sidelines before US Consumer Price Index (CPI) inflation figures due later in the day. Bank of England (BoE) policymaker Sarah Breeden is also scheduled to speak.

Expectations that the US Federal Reserve (Fed) could maintain higher interest rates for longer have strengthened following an above-forecast US Nonfarm Payrolls (NFP) report. The US Dollar could receive near-term support as a result.

According to the CME FedWatch tool, the probability of a December Fed rate increase priced into markets is now nearly 84.0%. Before the US employment report, it stood at 72.8%.

Tuesday’s main focus will be the US CPI inflation release. Forecasts point to a 0.3% MoM increase in headline CPI for October and a 0.2% rise in core CPI, which strips out volatile food and energy costs.

An annual October CPI reading will be absent from the report. The government shutdown a year earlier prevented the BLS from gathering some data and calculating a complete index level.

A 25 basis point (bps) increase last week took the BoE’s benchmark interest rate to 4.00%, its first rise in over three years. Governor Andrew Bailey stressed that the Middle East war, which is lifting energy prices, would be the principal consideration for future rate decisions. By the end of next year, markets anticipate three further increases, exceeding the expectations of most economists.

3 key data points and Bailey in focus as UK rates hold steady

Societe Generale strategists describe a steady opening for UK rates, noting that the "10y IRS opens unchanged at 4.70% after holding 4.69% (100dma) last week." With investors waiting for policy guidance, the bank defines the near-term technical range as "support 4.58%, resistance 4.78%,". Attention also turns to Governor Bailey, who "speaks in Zurich later today, first intervention since the MPC rate increase week," according to the bank. His appearance could influence expectations of how the BoE responds to changing conditions.

For domestic data, Societe Generale singles out "prel 3Q GDP on Thursday" as a major release and gives its projection as "SG forecast 0.7% qoq." The bank also highlights a packed international schedule for the "week ahead," listing "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,". These releases could shape global interest-rate and FX markets.

2026 rate cuts remain possible as BoE’s Pill flags greater outlook uncertainty

A score of 4.2/10 on FXS Speechtracker puts Pill’s latest comments well below the historic baseline of 6.4/10, indicating a softer tone and less conviction. His insistence that “nothing is baked in” for next year, alongside “no preset upward path” for rates from spring, represents a dovish change from earlier guidance that more firmly favoured restrictive policy.

Pill explicitly recognised that Bank Rate might remain unchanged or even decline if growth falters, with pressure on company margins the decisive factor. This underlines an approach sensitive to growth and dependent on incoming data. For GBP, greater uncertainty combined with a willingness to consider cuts shifts the balance of risks towards weakness. Markets are encouraged to reduce expectations of sustained tightening and give more weight to downside growth scenarios.

100-day SMA supports GBP/USD’s bullish bias: Technical Analysis

Holding above both the 100-day simple moving average (SMA) and the middle Bollinger band leaves GBP/USD with a modest bullish bias on the daily chart. This positioning points to underlying buying interest on shallow dips. At roughly 57, the Relative Strength Index (RSI) remains in positive territory. Upside momentum therefore appears constructive as the pair consolidates just beneath the upper Bollinger band.

Near 1.3500, the upper Bollinger band provides the first resistance level. A decisive move above it would clear the path for a stronger rise. Initial downside support lies around 1.3400 at the 100-day SMA, ahead of the Bollinger midline near 1.3370. Should the current bullish structure break down, the lower band around 1.3238 would define a deeper support area.

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