British Pound falls further against US Dollar as attention turns to US PPI

• Near 1.3227 on Friday, the British Pound extends its decline against the US Dollar.
• Persistent US inflation and a hawkish Fed outlook continue to underpin the US Dollar, according to NBC.
• US PPI figures and UK employment and CPI releases are next in focus for investors.

Expectations that the Federal Reserve (Fed) will accelerate its monetary tightening cycle continue to favour the US Dollar (USD), sending GBP/USD down towards 1.3227 on Friday. The British Pound (GBP) is consequently on course for its fourth consecutive trading day of losses against the US currency.

The US Dollar Index (DXY) remains close to Thursday’s 19-month high of 103.24 at the time of writing. The index measures the Greenback against a basket of six major currencies.

Dollar retains support from inflation, Fed tightening prospects and safe-haven demand

According to strategists at National Bank of Canada (NBC), the Dollar “remains supported by persistent inflation and the prospect of further Fed tightening.” Explaining their policy outlook, they say that “following October’s pause, another firm Consumer Price Index (CPI) report reinforces our expectation for tighter policy before year-end,” while warning that a “deterioration in global risk appetite could provide further support through safe-haven demand.”

Monthly US headline and core inflation reached 0.4% and 0.3%, respectively, in October, both exceeding expectations, Tuesday’s CPI report showed.

Ahead of the US CPI release, Fed Governor Christopher Waller said that “half-point Fed rate hike may be needed in December, if October core CPI inflation comes in around 0.3% or higher.”

Fed rate rise expectations strengthen as Waller adopts a more hawkish stance

A 9/10 FXS Speechtracker score, markedly above the historical average of 7.3/10, reflected the notably more hawkish tone of Fed Governor Waller’s remarks and his unusually strong emphasis on tighter policy. His explicit willingness to consider a half-point Fed rate rise in December if core CPI reaches 0.3% or more, alongside backing for a quarter-point increase even if inflation data improve, points to a clear preference for further tightening. He regards inflation as “too high” and recent data as “bad.” The breadth of price rises, continuing producer and energy price pressures, and the need to lift real rates all reinforce the view that policy is not yet sufficiently restrictive. Sharp equity price movements carry little weight in that assessment.

An increase of 3.17 points took the FXS Fed Sentiment Index to 145.50, leaving it firmly in hawkish territory and in line with the high FXS Speechtracker score. The shift indicates a meaningful tightening in perceptions of the Fed’s policy stance. As markets assign a greater probability to December rate rises, this is likely to underpin the Dollar and maintain pressure on interest-rate-sensitive assets.

October’s US Producer Price Index (PPI), due at 13:30 GMT later in the day, will be the next focus for investors.

For sterling, attention is turning to next week’s United Kingdom (UK) labour market figures for the three months to September, alongside October’s Consumer Price Index (CPI) release.

GBP/USD Remains Under Pressure Below Its EMA

Trading at 1.3226 on the daily chart, GBP/USD continues to show a bearish near-term bias. The spot rate sits beneath the 20-period exponential moving average (EMA) of 1.3337, leaving that level as immediate overhead resistance. At 39.9, the Relative Strength Index (RSI) is below the neutral 50 threshold, suggesting that selling pressure remains dominant even though the indicator has not reached an oversold extreme.

A daily close above the 20-day EMA at 1.3337, the first resistance level, would be required to temper the bearish outlook and open the way for a more durable recovery. Without that break, further losses remain a risk: traders are likely to sell rallies for as long as momentum stays below the midline.

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