British Pound sticks to gains vs USD as BoE Pill's dovish tone cap upside ahead of UK data

• GBP/USD attracts strong buyers on Thursday as a sharp fall in US bond yields weighs on the USD.
• Comments from BoE’s Pill temper aggressive rate hike bets, capping further upside for the GBP.
• A hawkish Fed and geopolitical uncertainties limit USD losses, warranting caution for GBP bulls.

The GBP/USD pair is seen building on the overnight bounce from the 1.3135 area, or the year-to-date low, and gaining strong follow-through positive traction during the Asian session on Thursday. Spot prices stick to strong intraday gains around mid-1.3200s and remain supported by a broadly weaker US Dollar (USD).

Despite Wednesday's hot US consumer inflation figures, investors seem convinced that the Federal Reserve (Fed) will keep interest rates steady at its October policy meeting. Adding to this, a Bloomberg report suggests that China seems to be moving US securities to non-US custodian banks in other countries, triggering a steep decline in US bond yields. This, in turn, drags the USD Index (DXY), which tracks the Greenback against a basket of currencies, further away from an 18-month high, which, in turn, is seen as supporting the GBP/USD pair.

Meanwhile, Bank of England (BoE) Chief Economist Huw Pill said on Wednesday that he is a bit more skeptical about market pricing of four rate hikes over the next year and added on Thursday that we should not give the impression that a raise now would be the start of a series of increases. The comments temper market expectations for a more aggressive policy tightening by the BoE, keeping a lid on the British Pound (GBP). Furthermore, hawkish Fed expectations and escalating Middle East tensions limit USD losses, capping the GBP/USD pair.

Pill tempers rate hike expectations, limiting upside for Pound

The drop in the FXS Speechtracker score to 3/10 from a historic 6.4/10 signals a clear dovish shift in Pill’s tone. By stressing that a potential hike “should not give impression that a hike now would be the start of a series of increases,” Pill effectively downplays the prospect of a sustained tightening cycle, capping support for the Pound.

This framing suggests any future move would be more of a one-off adjustment than the start of a new hiking phase, reducing the appeal of Pound carry trades versus the Dollar and Euro. For FX markets, the speech points to limited upside for the Pound and raises the risk of a softer path ahead if data fail to justify repeated tightening.

According to CME Group's FedWatch Tool, traders are still pricing in over an 85% chance that the US central bank will raise borrowing costs by the end of this year amid energy-driven inflation risks. Adding to this, geopolitical uncertainties stemming from the US-Iran standoff over the Strait of Hormuz, and intensifying fighting between the Iran-backed Houthis in Yemen and Saudi Arabia, could act as a tailwind for the safe-haven buck. This might hold back bulls from placing fresh bets on the GBP/USD pair as traders look to Thursday's economic data.

The UK monthly GDP print will be published later today, along with Goods Trade Balance data and Industrial Production figures. The focus, however, will be on the US Producer Price Index (PPI), due for release during the early North American session. Apart from this, Fed Chair Kevin Warsh's speech at the annual meetings of the IMF and World Bank in Bangkok on Friday will be looked at for more cues about the future policy path. The outlook, in turn, will influence the USD price dynamics and provide a fresh impetus to the GBP/USD pair.

GBP/USD 4-hour chart

Technical Analysis

The GBP/USD pair continues with its struggle to make it through the 100-period Exponential Moving Average (EMA) on the 4-hour chart and holds a capped beneath a horizontal barrier near 1.3300. This suggests upside attempts are struggling against overhead supply.

A sustained break above the said handle would be needed to ease current downside pressure and open the way toward higher levels on the four-hour chart, while failure to do so keeps the GBP/USD pair vulnerable to further consolidation or pullbacks below 1.3200.

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