- GBP/USD heads for a 0.90% weekly loss after retreating from 1.3460.
- US headline PPI rises to 6.5% YoY, the highest since 2022.
- December Fed hike odds approach 90% despite rising BoE tightening expectations.
The British Pound (GBP) holds steady against the US Dollar on Friday, yet it’s poised to end the week with weekly losses of nearly 0.90%, trading at around 1.3230 after the recent US producer inflation report reached its highest level since November 2022.
GBP/USD pressured by US inflation data, Fed rate hike expectations
The US Producer Price Index (PPI) in October rose by 6.5% YoY, below forecasts but above September’s 6.3% print, largely due to higher transportation and warehousing prices. Core PPI, which strips items like food and energy, was unchanged from the previous month and aligned with estimates at 5%.
Federal Reserve (Fed) officials are crossing the wires. Chicago’s Fed President Austan Goolsbee warned that inflation data suggest it’s worsening, which “would make the Fed more aggressive.”
Money markets have priced in a nearly 90% chance that the Fed will increase rates by 25 basis points in December. However, there is a slim 10% chance that policymakers could aim for a 50-basis-point increase, according to the CME FedWatch Tool.
Recent US inflation data, hawkish comments from Fed officials and expectations that the Fed may embark on a tightening cycle pushed GBP/USD lower after it hit a weekly high near 1.3460.
In the UK, Gross Domestic Product (GDP) data matched estimates on Thursday, following last week’s Bank of England (BoE) rate hike, as market participants already expect another move in December, with odds at 85%.
Next week, traders are eyeing the release of the UK’s inflation data. In the US, the Fed parade continues, with Retail Sales and the minutes of the latest Federal Open Market Committee meeting grabbing the spotlight.
GBP/USD Price Forecast: Technical outlook.
In the daily chart, GBP/USD trades at 1.3236, retaining a bearish near-term bias as spot holds beneath the latest triple simple moving average (SMA) reading around 1.3341 and a series of former rising trend-line supports that now act as overhead resistance near 1.3360 and 1.3606. The Relative Strength Index (RSI) at 40.6 stays below the midline, hinting at persistent downside pressure rather than oversold conditions, while the broader pattern of descending resistance lines off 1.3869 and 1.3653 reinforces the impression that rallies remain capped within a corrective environment.
On the topside, initial resistance is located at the clustered 1.3341–1.3360 area, where the triple SMA aligns with the nearest reclaimed trend support, followed by the descending resistance levels around 1.3508 and 1.3544, ahead of the higher former support zone close to 1.3606. With no clear structural support levels defined in the immediate vicinity below 1.3236 by the current dataset, any sustained break below recent lows would leave the pair vulnerable to extending the decline into fresh territory, keeping sellers in control unless price can recover and hold above the 1.3340–1.3360 band.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.