GBP/USD dropped below the 1.3300 level as hawkish Fed rhetoric and a 5% US 10-year yield bolstered the Dollar, with investors now awaiting UK GDP and US PPI data for further direction.
Hot US core CPI at 0.3% MoM for a third straight month triggered hawkish Fed rhetoric, with Waller signaling a 50bp hike and markets fully pricing a 25bp hike. The pair fell 0.55% below 1.3300 to 1.3282, with rising US yields adding pressure. Technicals reinforce the bearish tone, with price below the 50/100/200-day SMA cluster near 1.3352 and support seen at 1.3159 and 1.3140.
The 10-year T-note yield reached 5%, up nearly 12 basis points on Tuesday, as the hot 0.3% MoM core CPI and hawkish Fed commentary led markets to fully price a 25bp rate hike. Continued hawkish signals from officials like Logan and Paulson support further yield pressure upward into Friday's PPI release.
The British Pound fell 0.55% to 1.3282 against the US Dollar as markets reacted to a hot 0.3% MoM core CPI reading. Fed officials, including Christopher Waller, signaled potential for aggressive rate hikes, driving the US 10-year Treasury yield up nearly 12 basis points to 5%.
A hotter-than-expected US inflation reading led Fed officials, including Governor Waller, to signal faster rate hikes, prompting traders to buy the US Dollar while the 10-year US yield rose about 12 basis points to 5%.
Thursday's UK GDP figures and Friday's US PPI data are the next catalysts; stronger UK growth or softer US inflation could help the Pound recover, while the opposite would add pressure.
US inflation came in hotter than expected and several Fed officials signaled readiness to hike rates faster, leading markets to fully price in a 25-basis-point hike and pushing the yield up nearly 12 basis points.