British Pound holds steady below 1.3450 as markets await US CPI data

• With little movement in early Asian trade on Tuesday, GBP/USD hovers near 1.3445.
• A December Fed rate hike carries an 84.0% probability in traders’ expectations.
• Upside risks to inflation continue to worry BoE’s Bailey.

A cautious mood keeps GBP/USD largely unchanged around 1.3445 in Tuesday’s early Asian session, as traders hold back ahead of the US Consumer Price Index (CPI) inflation release due later in the day. A speech by Bank of England (BoE) policymaker Sarah Breeden is also on the agenda.

The Greenback could find near-term support from expectations that the US Federal Reserve (Fed) may maintain higher interest rates for longer. Those expectations have strengthened following an above-forecast US Nonfarm Payrolls (NFP) report.

According to the CME FedWatch tool, the probability of a December rate increase by the Fed has climbed to nearly 84.0%, compared with 72.8% before the US employment release.

Attention later on Tuesday turns to the US CPI inflation release, with headline prices expected to have increased 0.3% MoM in October. For core CPI, which strips out volatile food and energy costs, the forecast is for a 0.2% rise.

No annual October CPI reading will appear in the report. A government shutdown a year earlier prevented the BLS from gathering some of the data needed to compile a complete index level.

With a 25 basis points (bps) increase last week, the BoE took its benchmark interest rate to 4.00%, its first hike in more than three years. In discussing future rate decisions, BoE Governor Andrew Bailey highlighted the Middle East war and the resulting rise in energy prices as the principal consideration. By the end of next year, markets anticipate three further hikes, exceeding the expectations of most economists.

Can UK rates stay steady as markets await Bailey and key 3 data?

Investors awaiting policy cues face an immediate technical range defined by "support 4.58%, resistance 4.78%," according to strategists at Societe Generale. They describe a stable opening for the UK rates market, noting that the "10y IRS opens unchanged at 4.70% after holding 4.69% (100dma) last week." Attention also centres on Governor Bailey, who the bank says "speaks in Zurich later today, first intervention since the MPC rate increase week," with the appearance potentially shaping expectations about how the BoE responds to economic conditions.

For the domestic calendar, Societe Generale identifies "prel 3Q GDP on Thursday" as an important release and gives its own projection as "SG forecast 0.7% qoq." The strategists also draw attention to a packed international schedule in 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," a concentration of releases with potential implications for global interest-rate and FX markets.

Could BoE’s Pill pave the way for 2026 rate cuts as outlook uncertainty grows?

A more dovish message emerges from Pill’s latest speech, which registers 4.2/10 on FXS Speechtracker against a historical baseline of 6.4/10. The lower score points to a softer tone and less conviction. His emphasis that “nothing is baked in” for next year, alongside “no preset upward path” for interest rates from spring, contrasts with earlier guidance that favoured maintaining restrictive policy more firmly.

A growth-sensitive, data-dependent approach is reinforced by the explicit recognition that Bank Rate could remain unchanged or even decline if growth falters, with pressure on company margins identified as the key determinant. For GBP, greater uncertainty alongside a willingness to consider cuts shifts the balance of risks towards weakness. It encourages markets to scale back expectations of a persistent tightening bias and give greater weight to downside growth scenarios.

Technical Analysis: Can GBP/USD sustain its bullish bias above the 100-day SMA?

Underlying buying interest on modest dips continues to support a mildly bullish daily outlook for GBP/USD, with spot trading above both the 100-day simple moving average (SMA) and the middle Bollinger band. At around 57, the Relative Strength Index (RSI) remains in positive territory. This suggests upward momentum is still favourable as the pair consolidates just beneath the upper Bollinger band.

A decisive move through the upper Bollinger band near 1.3500, the immediate resistance level, would clear the path for a more pronounced rise. Initial downside support lies around 1.3400 at the 100-day SMA, ahead of the middle Bollinger band near 1.3370. Should the current bullish structure break down, the lower band around 1.3238 would provide a deeper support area.

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