British Pound retreats as USD demand recovers; seeks to defend 1.3300 ahead of key US data

• Renewed USD demand puts GBP/USD under fresh selling pressure in Asian trading.
• Inflation worries linked to oil sustain expectations of a Fed rate rise, lending support to the dollar.
• With key US economic releases ahead, geopolitical uncertainty provides additional support for the USD.

The 1.3300 level comes into view as GBP/USD falls over the past hour, with broad US Dollar (USD) strength prompting renewed selling during Thursday's Asian session. The decline interrupts Wednesday's rebound from the 1.3275-1.3270 area, a low not seen for nearly two weeks. However, bearish traders have reason to remain cautious, given the absence of sustained selling.

An approximately 80% probability of a further increase in US borrowing costs in December is currently priced in by traders, according to the CME Group's FedWatch Tool. With high energy prices posing inflation risks, expectations of another Federal Reserve (Fed) rate rise this year remain intact, helping the USD recover from the previous day's post-FOMC decline. Continuing geopolitical uncertainty also supports the dollar's safe-haven appeal and is seen adding downward pressure to GBP/USD.

Efforts to revive peace talks form the latest development in the Middle East crisis, with US Vice President JD Vance reportedly writing to Mohsen Rezaei, secretary of Iran's Supreme National Security Council. At the same time, US President Donald Trump is threatening to restart military action in the coming weeks. According to The Wall Street Journal, US officials have advised several Middle East countries and regional allies to prepare for a possible brief but intense military campaign against Iran after the November 3 midterm elections.

To avert a return to war, regional mediators led by Qatar are seeking to get US-Iran negotiations under way again. Dollar bulls may also hold off on new positions until there is greater clarity on the Fed's policy course beyond December. Attention therefore turns to the Advance US Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index. For GBP/USD, expectations that the Bank of England (BoE) will tighten monetary policy could meanwhile provide some protection against further losses.

GBP/USD on the 4-hour chart

GBP/USD Retains a Slight Bullish Bias

Trading above both the 100-period Simple Moving Average (SMA) on the 4-hour chart and the mid-range Fibonacci support levels leaves GBP/USD with a modestly bullish near-term outlook. The pair is currently just above the 38.2% retracement, maintaining a constructive tone as it tests the upside towards the top of its recent recovery range.

The first upside hurdle is the 23.6% Fibonacci retracement at 1.3352, followed by the cycle high near 1.3417. Support immediately below the market lies at the 38.2% retracement of 1.3311. Further down, the 50.0% level at 1.3278 precedes Fibonacci support at 1.3246 and 1.3199, while the 1.3140 area provides a more distant structural base.

(The technical analysis of this story was written with the help of an AI tool. Know more.)