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- GBP/USD depreciates as rising oil prices fuel inflation concerns, boosting the US Dollar on Fed rate-hike expectations.
- BoE hawk Catherine Mann warned UK inflation could hit 4% around year-end, supporting prolonged high interest rates.
- High UK energy costs and persistent price pressures continue reinforcing market expectations for higher-for-longer Bank of England rates.
GBP/USD loses ground after registering modest gains in the previous day, trading around 1.3250 during Asian hours on Wednesday. The pair depreciates as the US Dollar (USD) gains ground, driven by rising oil prices that could revive inflation concerns and expectations for further Federal Reserve (Fed) rate hikes. Traders await the Federal Open Market Committee (FOMC) Meeting Minutes due later in the day.
However, the downside for the GBP/USD pair could be restrained as easing expectations for Federal Reserve (Fed) rate hikes following last week’s softer US jobs data weigh on the Greenback. According to the CME FedWatch tool, interest-rate swaps show traders pricing in an almost 20% probability that the Fed will lift benchmark borrowing costs at its October gathering.
G10 gains against the Dollar remain uneven into the US session
Strategists at Scotiabank observe that “G10 currencies continue to trade in mixed fashion vs. the USD,” with “a majority showing gains into Tuesday’s NA open.” This uneven performance underscores the still-fragmented nature of Dollar trading, even as more pairs edge higher into the North American session.
Meanwhile, the British Pound (GBP) could find support as elevated energy costs and persistent inflation concerns reinforce expectations for Bank of England (BoE) interest rates to remain higher for longer.
BoE policymaker Catherine Mann highlighted these risks on Tuesday, warning that inflation above the central bank’s 2% target appears embedded in the economy and could reach 4% around the turn of the year during typical wage negotiations. Mann, who has consistently voted for a 25-basis-point rate hike to 4% since July, noted that these wage dynamics could add further price pressures.
Technical Analysis:
In the daily chart, GBP/USD trades at 1.3250, keeping a bearish near-term tone as spot remains capped beneath both the nine- and 50-day Exponential Moving Averages (EMAs). The pair continues to grind lower away from these overhead averages, while the 14-day Relative Strength Index (RSI) at 39.3 stays below the midline, hinting at persistent downside pressure rather than an imminent bullish reversal.
On the topside, immediate resistance is seen at the nine-day EMA at 1.3259, which guards the path toward the denser technical barrier provided by the 50-day EMA at 1.3387. As long as GBP/USD trades under this EMA cluster, rallies are likely to be sold, and the broader bias would remain bearish unless a daily close above 1.3387 starts to weaken the prevailing downtrend structure.
