British Pound tumbles below 1.33 post hot US CPI, Fed hawkish rhetoric

The Pound Sterling drops against the US Dollar on Wednesday as traders digested hawkish comments from Federal Reserve (Fed) officials and a hot US inflation report on Tuesday. At the time of writing, the GBP/USD trades below the 1.3300 psychological figure, down 0.55%.

GBP/USD extends its decline below 1.3300, eyes on UK GDP and US PPI data

On Tuesday, the US Bureau of Labour Statistics (BLS) reported that the Consumer Price Index (CPI) dipped from 0.6% to 0.4% MoM, exceeding forecasts and signaling continued disinflation. But comments from Fed Governor Christopher Waller revealed intentions to increase rates by 50 basis points if core CPI was 0.3%; this was fulfilled as underlying inflation was 0.3% MoM for the third straight month, above estimates of 0.2%.

Consequently, market participants bought the US Dollar, in part underpinned by the rise of US Treasury yields. The 10-year T-note yield is at 5%, up nearly 12 basis points on Tuesday, while market participants had fully priced in a 25-basis-point rate hike, according to the CME FedWatch Tool.

Other Fed officials crossed the wires. Dallas Fed Lorie Logan and Philadelphia’s Fed Anna Paulson were also hawkish. Logan said that it may be possible to raise rates “more rapidly this winter,” while Paulson said that the “Fed will move more aggressively if inflation landscape worsens.”

In the Fed’s moderate camp were Fed Governor Michelle Bowman and Kansas City Fed President Jeffrey Schmid, with the former saying that persistent inflation suggests there is more work to do, while the latter added that there are concerning price trends, excluding the whole energy story.

In the UK, the docket was light, but investors are bracing for Thursday’s Gross Domestic Product (GDP) figures. In the US, market participants eye the release of jobless claims and housing data ahead of Friday’s Producer Price Index (PPI).

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3282, keeping a bearish near-term tone as spot holds beneath a dense band of medium-term resistance. The latest reading of the 50-, 100- and 200-day simple moving averages (SMAs) around 1.3352 sits comfortably above price, suggesting rallies remain capped while the pair trades under this cluster. A pair of downward-sloping resistance trend lines, drawn from 1.3869 and 1.3653, also run above the market, reinforcing the idea of a market contained within a broader corrective channel. Momentum backs this cautious stance, with the 14-period Relative Strength Index at 43.6, pointing to subdued buying interest and leaving scope for further corrective slippage if sellers regain control.

On the topside, initial resistance is defined by the nearer of the two descending trend lines projected from 1.3653, with a break there exposing the higher downtrend line drawn from 1.3869 and, beyond that, the confluent 50/100/200-day SMA cluster near 1.3352. On the downside, immediate support is anticipated from the first upward-sloping trend line that originates at 1.3159, ahead of a secondary rising support line anchored at 1.3140; a daily close below these structural floors would likely signal that bears are extending the broader decline.