GBP/USD trades near 1.3445 as investors weigh strong US labor data and an 84.0% chance of a December Fed hike against the Bank of England's recent 25bps rate increase to 4.00%.
Stronger-than-expected US Nonfarm Payrolls lifted the odds of a December Fed rate hike to 84.0% from 72.8% per CME FedWatch, reinforcing the higher-for-longer rate view that supports the Greenback near term. Today's US CPI is the next test.
The pair holds near 1.3445 with offsetting forces: the BoE hiked 25bps to 4.00% (supporting GBP) but Pill's dovish remarks (4.2/10 Speechtracker vs 6.4 baseline) and strong US jobs data, which lifted December Fed hike odds to 84.0%, weigh on the pair. Today's US CPI (0.3% MoM headline forecast) is the key trigger.
The BoE lifted its benchmark rate by 25bps to 4.00%, its first hike in over three years, and markets price three more hikes by end-2026, supporting Sterling. However, Pill's speech scores 4.2/10 and opens the door to 2026 cuts if growth stalls, tilting risks toward a weaker path.
The GBP/USD pair remains steady at 1.3445 as traders await the US October CPI report, which is forecast to show a 0.3% MoM headline increase. Markets are currently pricing in an 84.0% probability of a Federal Reserve rate hike in December, up from 72.8% following strong US jobs data. Meanwhile, the Bank of England faces internal policy uncertainty after policymaker Pill signaled a potential shift toward 2026 rate cuts if economic growth stalls.
Markets price in nearly an 84.0% chance of a December hike, up from 72.8% before the US jobs report, according to the CME FedWatch tool.
The headline CPI is expected to rise 0.3% MoM in October and core CPI 0.2%, with no annual reading published because of the government shutdown a year ago.
Traders are waiting on the sidelines ahead of the US CPI report later Tuesday and Bailey's Zurich speech, with strong US jobs data having raised Fed December hike odds to about 84%.
Resistance sits at the upper Bollinger band near 1.3500; support lies at the 100-day SMA around 1.3400, then the Bollinger midline near 1.3370, with deeper support around 1.3238.
Yes, last week the BoE lifted its benchmark rate by 25 basis points to 4.00%, its first increase in over three years.
Pill said nothing is baked in for next year and there is no preset upward path for rates from spring, with margin squeeze on companies the key determinant, leaving room for holds or cuts if growth stalls.