- GBP/USD traded at 1.3225 at 06:30 GMT on Friday, putting sterling on course for a fourth straight daily loss.
- The dollar held near a 19-month high as traders weighed the possibility of a larger Federal Reserve rate hike in December.
- US producer prices are due at 13:30 GMT. UK jobs and inflation figures follow on November 17 and 18.
- 1$1.3200 Key supportA daily close below 1.3200 brings October lows into view
- 2$1.3300 Initial resistanceRecovery above 1.3300 would show the selloff is easing
- 3$1.3358 20-day SMA · Resistance20-day moving average and next test above 1.3300
- 4$1.3140 October lows · SupportDownside level in view on a daily close below 1.3200
- 5$1.3500 Last week's high · Key levelLevel sterling retreated from over the past week
TradingView Lightweight Charts™ · Yahoo Finance data
The British pound fell to $1.3225 early on Friday, November 13, as the prospect of a larger US rate hike overshadowed last week’s Bank of England increase. Sterling has retreated from around $1.35 last week even though UK growth picked up in the third quarter. The difference is that Britain’s GDP figures matched expectations, while US inflation came in hotter than forecast and gave traders a reason to rethink how far the Fed might go.
Why Is the Pound Falling Against the Dollar After the BoE Rate Hike?
The Bank of England raised its benchmark rate by a quarter point to 4% on November 5. Eight policymakers backed the move, while Catherine Mann wanted a half-point increase. Thursday’s GDP report showed the UK economy grew 0.7% in the third quarter, up from 0.5% in the previous quarter. Services led the expansion, but the headline figure was in line with expectations. It supported the case for the hike the BoE had already delivered and did little to change expectations for the next one.
The US data gave traders more to react to. Core consumer prices rose 0.3% in October, above the 0.2% forecast in a Reuters poll. Before the release, Fed Governor Christopher Waller had singled out 0.3% as a reading that could warrant considering a half-point hike in December. That was one policymaker’s view, but it helped push US Treasury yields higher as traders weighed the odds of a bigger move.
US PPI Today: What Would Move GBP/USD?
Economists expect US producer prices to rise 0.4% in October, down from 1.3% in September. A slowdown is already in the forecast, so a smaller increase than September’s would not, by itself, be a reason for the dollar to fall. A reading above 0.4%, especially if price pressure extends beyond energy, could push Treasury yields higher and bring $1.3200 into play for sterling. A weaker print would give the pound more room to recover if US yields also fall.
UK Jobs and Inflation: What Could Bring Pound Buyers Back?
The UK labour market report is due Tuesday, followed by October inflation on Wednesday. Annual UK inflation rose to 3.5% in September from 3.1% in August, with motor fuel a major contributor. Services inflation also climbed, to 3.7% from 3.4%. That makes wage growth and services prices the figures to watch next week. If both stay firm, traders have more reason to expect another BoE hike in December. If hiring weakens and wage growth slows, a rise in headline inflation driven mainly by fuel may do less to support sterling.
GBP/USD Outlook: Can the Pound Hold $1.3200?
On the daily chart, sterling is below its 20-day simple moving average at 1.3358, and the MACD line has slipped below both its signal line and zero. A daily close below 1.3200 would bring the October lows near 1.3140 into view. A recovery above 1.3300 would be the first sign that the selloff is easing, with 1.3358 the next test.
Friday’s PPI can take some pressure off the pound if it pulls US yields lower. Next week’s UK figures will show whether sterling has a reason to rise on its own. Firm British wages and services inflation would strengthen the case for another BoE hike; soft readings would leave the pound more dependent on a retreat in the dollar.
Sterling isn’t the only currency struggling to regain ground. In our EUR/JPY forecast, we look at why the euro’s months-long slide against the yen may not be over.
The October US Producer Price Index is scheduled for 8:30 a.m. ET (13:30 GMT) on Friday, November 13. The consensus forecast is a 0.4% monthly rise.
A half-point hike is possible, but the Fed has made no decision. Waller said he would consider a larger move if October core CPI rose 0.3% or more. It rose 0.3%. The Fed next meets on December 8 and 9
The Office for National Statistics publishes October UK CPI on Wednesday, November 18, at 7:00 a.m. GMT, one day after the jobs and wage figures
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Anonymous · no sign-up · results from the last 30 days · not investment advice