British Pound catches bid as BoE hawk warns inflation is embedded

The Pound Sterling advances some 0.40% on Tuesday as the Greenback retreats from multi-month highs, boosted by hawkish comments by a Bank of England (BoE) member of the Monetary Policy Committee (MPC), while a widening of the US trade deficit weighed on the Greenback. The GBP/USD trades at 1.3281 at the time of writing.

Sterling advances as Dollar retreats, while markets boost November BoE hike bets

An improvement in risk appetite is hurting the US Dollar, which, according to the US Dollar Index (DXY), which measures its performance against six currencies, is down 0.31% at 101.78.

In the Middle East, hostilities continued, as Yemen forces and the Houthis exchanged fire as the former are trying to recapture Bab al-Mandab to reopen vessel traffic in the Red Sea. This pushed energy prices lower, with West Texas Intermediate (WTI), the US Oil benchmark, down 0.59% at $88.75 per barrel.

On the data front, the US trade deficit widened in August, as imports rose to a record high, resulting in record goods trade deficits with at least three countries, including Mexico. The figures came at $-105.6 billion, missing the forecast of $-102 billion.

Other data showed the labour market is solid, with the ADP Employment Change 4-week average rising to 23.75K, up from 22.5K the previous week.

In the UK, the schedule was light, with the BoE’s Catherine Mann stating that inflation has become embedded. Her comments boosted the Pound, and now traders' eyes are on BoE’s Governor Andrew Bailey, expected to speak on Thursday.

Money markets had priced in a 87% chance for a rate hike in November, revealed Prime Terminal, mostly due to the prolongation of the Middle East conflict, which has elevated energy prices.

GBP/USD Price Forecast: Technical Outlook

In the daily chart, GBP/USD trades at 1.3276, keeping a bearish near-term bias as spot holds beneath the dense cluster of the 50, 100 and 200-day Simple Moving Averages (SMAs) grouped around 1.3451. Price also remains below the latest downward-sloping resistance trend lines, with nearby supply first at the earlier break level of 1.3304 and then at 1.3428, reinforcing a capped tone despite the Relative Strength Index (RSI) at 41.6 hinting at only modestly negative momentum rather than outright oversold conditions.

On the topside, immediate resistance appears at the former break of the primary descending trend line near 1.3304, followed by the secondary downward resistance around 1.3428 and the broader SMA barrier clustered close to 1.3451. On the downside, initial support is derived from the rising trend structure, with the more recent upward-support line anchored near 1.3159 and the deeper medium-term base around 1.3140, where buyers would be expected to re-emerge if the current 1.3276 pivot gives way.