British Pound slips below 1.34: Could hot CPI prompt a 50-bps Fed hike?

• Intensifying selling pressure pushes GBP/USD down over 0.40% to 1.3396.
• Above the 0.2% forecast, US Core CPI records a 0.3% MoM increase.
• A 0.3% MoM Core CPI reading would put a 50-bps hike under consideration for Waller.

Selling pressure weighs on the Pound Sterling on Tuesday, pulling it down over 0.40% against the US Dollar, with GBP/USD trading at 1.3396. US inflation data indicate that the Federal Reserve (Fed) still has work to do. In hawkish remarks, Fed Governor Waller suggested that a 50-basis-point (bps) increase would be justified by a core CPI reading of 0.3% MoM, which the subsequent data delivered.

Does stronger-than-expected US inflation strengthen Waller’s case for a larger rate hike as GBP/USD falls?

October’s Core Consumer Price Index (CPI) increased 0.3% month on month, surpassing the 0.2% estimate, according to the US Bureau of Labour Statistics (BLS). Although headline CPI slowed to 0.4% MoM from September’s 0.6%, it still exceeded the 0.3% forecast.

While describing the economy as strong and the labour market as stable, Governor Christopher Waller cautioned that inflation remained too high. An improvement in October’s inflation would lead him to favour a 25 bps rate increase, he said. A reading similar to those of the previous two months, however, would prompt him to favour a 50 bps increase.

According to the CME FedWatch Tool, the probability of a 25 basis points rate increase climbed to 85% after Waller’s comments, while the likelihood of a 50 bps move stands at 14%.

UK BRC Like-For-Like Retail Sales edged up to 1.1% in October from 1%, falling short of the 1.2% forecast. Attention now turns to Thursday’s Gross Domestic Product (GDP) release, with the economy estimated to have expanded 0.7% QoQ in Q3.

Thursday’s US economic calendar includes Initial Jobless Claims, housing figures and remarks from Fed speakers.

GBP/USD Price Forecast: Can the pair overcome technical resistance?

Near-term upside remains constrained on the daily chart, where GBP/USD trades at 1.3376 below the closely grouped 50-, 100- and 200-day simple moving averages (SMAs) around 1.3453–1.3457. With the price sitting just above a descending trend-line support zone near 1.3375–1.3226, the pair appears to be consolidating within a wider corrective downtrend. Meanwhile, the Relative Strength Index (14), at around 51, points to neutral but stabilising momentum rather than a clear bullish reversal.

The first upside hurdle is the 200-day SMA near 1.3453, with the 100-day SMA at 1.3455 and the 50-day SMA at 1.3457 immediately above it. Only a sustained break through this cluster would ease the current resistance and clear a path towards higher ascending trend-line barriers near 1.3700 and 1.3868. Below the current price, the descending trend line at 1.3375 offers immediate support, followed by the lower trend-line floor around 1.3226. A decisive break below that next key level would strengthen the bearish bias and leave the pair vulnerable to further losses.

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