GBP/USD Ahead of US CPI: Pound at 1.3260 on Williams

GBP/USD rose to around 1.3260 in early Asian trade on Wednesday as dovish signals from NY Fed President John Williams weighed on the US Dollar, according to FXStreet. The move puts GBP/USD ahead of US CPI, the September inflation report due on Wednesday, with traders hesitant.

Key Takeaways

Dovish Fed signal: The FXS Speechtracker scored Williams' remarks at 3.4/10, against a historical average of 5.8/10.
Fed pricing: Markets price a 77.3% chance the Fed holds at its October 27-28 meeting and an 87.8% chance of a hike in December, per CME FedWatch.
Sterling support: A quarter-point Bank of England hike next month is treated as a near certainty.

What Happened

The US Dollar softened against the British Pound after Williams, the New York Federal Reserve President, spoke on Tuesday. He said: "I haven't changed my view that it may be appropriate to have one more rate hike in 2026."

He then added: "I don't think at this time I have any reason to believe that we would need to do more." The FXS Fed Sentiment Index fell 3.09 points to 133.86, against a neutral level of 100.

Background

Bank of England Governor Andrew Bailey said on Tuesday that UK companies are focused on containing costs amid an energy price surge linked to the Iran war. He said broader UK inflation pressure from the energy shock has been subdued.

ING says the policy backdrop remains broadly supportive for the Pound. It describes market expectations of 100bp of Bank of England hikes by July 2027 as stretched, though its analysts say one or two hikes are looking increasingly likely.

Market Impact

GBP/USD: The daily RSI is 44. Resistance sits at 1.3375 (upper Bollinger band) and 1.3395 (100-day SMA). Support is near 1.3150 (lower Bollinger band).
USD/JPY: USD/JPY stays range-bound near 158.50, with intervention risks supporting the Japanese Yen.
AUD/USD: AUD/USD stays firm near 0.7000 and was little moved by China's mixed inflation data.
Gold: Gold oscillates near $4,150. Escalating Saudi Arabia–Houthi hostilities lift oil prices and weigh on gold, while a softer US Dollar limits losses.

What to Watch Next

US September CPI: The release on Wednesday is the data point traders are waiting for before adding to US Dollar positions.
FOMC meeting, October 27-28: It is the next Fed decision, and market pricing currently points to a hold.
UK budget on 28 October: ING flags the budget as a risk for sterling because markets price little fiscal concern. Chancellor John Healey and Prime Minister Andy Burnham have appeared mindful of market sensitivities.

Bottom Line

According to FXStreet, GBP/USD gained because Williams' dovish tone weighed on the US Dollar. ING's view is that sterling's policy backdrop is supportive but market pricing is stretched. For GBP/USD traders, the US CPI release and the UK budget on 28 October are the scheduled events that bear on current positioning.

GBP/USD Ahead of US CPI: Pound Rises to 1.3260