Why has the British Pound tumbled below 1.33 following hot US CPI and hawkish Fed rhetoric?

• Intensifying selling pressure pushes GBP/USD below 1.3300, down 0.55%.
• Fed rate hike expectations strengthen as US Core CPI remains at 0.3% MoM.
• With Thursday's UK GDP release approaching, US 10-year Treasury yields touch 5%.

Selling pressure weighs on the Pound Sterling against the US Dollar on Wednesday, with GBP/USD trading below the psychological 1.3300 level, down 0.55% at the time of writing. Traders are assessing hawkish remarks from Federal Reserve (Fed) officials alongside Tuesday's elevated US inflation reading.

Can UK GDP and US PPI data alter GBP/USD's decline below 1.3300?

Expectations for further tightening drew support from Tuesday's inflation figures. The US Bureau of Labour Statistics (BLS) put monthly Consumer Price Index (CPI) growth at 0.4%, down from 0.6% but above forecasts, indicating that disinflation was continuing. Fed Governor Christopher Waller had indicated an intention to raise rates by 50 basis points if core CPI came in at 0.3%. That condition was met: underlying inflation registered 0.3% MoM for the third consecutive month, exceeding the 0.2% estimate.

Higher US Treasury yields provided part of the support for the resulting US Dollar buying. Following a rise of nearly 12 basis points on Tuesday, the 10-year T-note yield stands at 5%. Meanwhile, the CME FedWatch Tool showed that market participants had fully factored in a 25-basis-point rate hike.

Hawkish messages also came from Dallas Fed Lorie Logan and Philadelphia’s Fed Anna Paulson as further Fed comments reached the market. A rate increase “more rapidly this winter,” may be possible, Logan said, while Paulson stated that the “Fed will move more aggressively if inflation landscape worsens.”

A more moderate stance came from Fed Governor Michelle Bowman and Kansas City Fed President Jeffrey Schmid. Bowman said persistent inflation indicated that more work remained, while Schmid highlighted worrying price trends even when the entire energy picture was excluded.

With few UK releases on the calendar, investor attention is turning to Thursday's Gross Domestic Product (GDP) figures. Across the Atlantic, traders await jobless claims and housing figures before Friday's Producer Price Index (PPI) release.

GBP/USD Price Forecast: What does the technical picture suggest?

A concentration of medium-term resistance above spot keeps the near-term bias bearish, with GBP/USD at 1.3282 on the daily chart. Around 1.3352, the latest readings of the 50-, 100- and 200-day simple moving averages (SMAs) remain well above the current price, indicating that this cluster continues to constrain rallies while the pair stays below it. Resistance also comes from two falling trend lines originating at 1.3869 and 1.3653, both positioned above the market and consistent with a broader corrective channel. Momentum offers little reason to depart from this cautious view: the 14-period Relative Strength Index reads 43.6, signalling limited buying interest and room for another corrective decline should sellers retake control.

Any recovery would first encounter the nearer descending trend line projected from 1.3653. A break above it would bring the higher falling trend line originating at 1.3869 into focus, followed by the converging 50/100/200-day SMAs around 1.3352. Below the market, the first rising trend line, beginning at 1.3159, is expected to provide immediate support, with a second ascending support line anchored at 1.3140 behind it. A daily close beneath these structural support levels would likely indicate an extension of the broader bearish move.

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