GBP/USD trades at 1.3275 ahead of Thursday's UK Q3 GDP release, with the pair facing technical pressure below the 100-day SMA while markets price in an 87.3% chance of a December Fed rate hike.
The hotter-than-expected October CPI print and supportive comments from Governor Waller, who backs a quarter-point December hike or half-point if inflation worsens, have driven a hawkish shift in Fed expectations. Markets price an 87.3% chance of a December hike, underpinning broad-based dollar strength as cited by BBH strategists.
Hawkish BoE comments from Megan Greene on Wednesday (proactive tightening, wage growth too high) support the Pound, but hotter US CPI has lifted December Fed hike odds to 87.3%, underpinning broad dollar strength. The pair trades below its 100-day SMA at 1.3400 with a bearish bias, and Thursday's preliminary UK Q3 GDP (SG forecast 0.7% qoq) is the key near-term decider.
BoE's Greene delivered a strongly hawkish signal (FXS Speechtracker 9.4/10 vs 7.7/10 baseline), arguing for earlier and more forceful tightening on reduced labour slack, which supports a stronger Pound bias. However, the benefit is offset by dollar strength from Fed hike bets, and Thursday's Q3 GDP print could still disappoint.
The GBP/USD pair remains steady near 1.3275 as traders balance hawkish signals from the Bank of England against a strengthening US dollar. Markets are currently pricing in an 87.3% probability of a Federal Reserve rate hike in December following hotter-than-expected US inflation data.
According to the CME FedWatch Tool, markets price an 87.3% chance of a rate hike at the December meeting, with a 12.7% probability of a 50 bps move.
Thursday's preliminary UK Q3 GDP reading, Governor Bailey's speech in Zurich, and further Fed commentary ahead of the December meeting, where markets price an 87.3% chance of a rate hike.
Yes, BoE policymaker Megan Greene signalled a proactive tightening stance citing wage growth that is too high, which supports Sterling, but a strong US dollar has so far offset this.
BoE policymaker Megan Greene called for proactive tightening to contain wage growth, and markets see a higher chance of additional BoE rate hikes.