Pound Rises vs Dollar as Markets Eye U.S. CPI, Fed

Key Moments

GBP/USD trades near 1.3260 in early Asian hours on Wednesday amid pressure on the U.S. Dollar from dovish signals by New York Fed President John Williams.
Futures markets assign a 77.3% probability that the Fed will keep rates unchanged at its October 27-28 meeting, with an 87.8% chance of a hike at the December meeting.
GBP/USD remains technically bearish below the 100-day simple moving average, with resistance around 1.3375-1.3395 and support near 1.3150.

Dollar Softens as GBP/USD Climbs Ahead of U.S. CPI

The British Pound is gaining ground against the U.S. Dollar, with GBP/USD strengthening to around 1.3260 during the early Asian session on Wednesday. The move comes as more dovish commentary from New York Federal Reserve President John Williams weighs on the Dollar, while market participants turn their focus to the release of U.S. September Consumer Price Index (CPI) inflation data later in the day.

On Tuesday, Williams reiterated his view that the Federal Reserve may still need to raise interest rates once more this year to bring inflation lower. “I haven’t changed my view that it may be appropriate to have one more rate hike in 2026,” said Williams. Regarding the outlook further out, he added, “And when it comes to 2027, I don’t think at this time I have any reason to believe that we would need to do more.”

Despite that comment on the possibility of another move, the overall tone was perceived as leaning dovish at the margin, which has modestly undercut support for the Dollar and helped GBP/USD hold near session highs.

Rate Expectations: Fed and BoE Paths in Focus

Market pricing indicates traders largely expect the Fed to remain on hold in the near term. According to the CME FedWatch tool, participants currently see roughly a 77.3% chance that the central bank will leave its policy rate unchanged at the October 27-28 meeting. However, the probability of an additional rate increase at the final meeting of the year in December stands higher, at about 87.8%.

In the United Kingdom, monetary policy expectations are also tilted toward further tightening. Bank of England Governor Andrew Bailey stated on Tuesday that UK companies are concentrating heavily on controlling costs in response to elevated energy prices linked ‌to the Iran war. He also emphasized that the impact of the energy shock on broader UK inflation has so far been contained. Money markets are currently treating the likelihood of a quarter-point rate hike by the BoE next month as almost certain.

ING: Policy and Budget Outlook Seen as Supportive for Sterling

Analysts at ING argue that the broader policy environment still favors the Pound, even if they view current market pricing as somewhat aggressive. They note that they “still think BoE rate expectations are too hawkish for 2027 (100bp by July),” but acknowledge that “one or two hikes are looking increasingly likely,” suggesting any “dovish shift” in policy will “have to wait until well into 2027, underpinning GBP strength.”

On the fiscal side, ING points to the “UK budget on 28 October” as “a potential risk for sterling, as markets are pricing in little fiscal concern.” Even so, the firm highlights that Chancellor John Healey and Prime Minister Andy Burnham “have appeared mindful of market sensitivities,” and concludes that while the budget “will be closely scrutinised,” they “do not currently expect it to trigger significant bond volatility or leave a lasting negative mark on GBP.”

Fed Sentiment: Softer Williams Message, But Overall Tone Still Hawkish

Williams’ latest remarks were assessed as more dovish relative to his historical baseline. The FXS Speechtracker assigned a score of 3.4/10, noticeably below the long-run average of 5.8/10, indicating a softer stance. His explicit indication that no additional rate hike is seen as necessary in 2027, alongside confidence that inflation will slow “quite a bit” toward the Fed’s 2% target next year, has reinforced expectations for an extended pause, contributing at the margin to a weaker bias for the Dollar.

Nonetheless, his emphasis that inflation is still moving toward, rather than firmly at, target prevents the overall policy message from turning decisively dovish. The FXS Fed Sentiment Index declined by 3.09 points to 133.86 following the speech, signaling a material pullback in perceived hawkishness. Even after this drop, the index remains comfortably above the neutral mark of 100, suggesting that Fed communication overall continues to lean hawkish, despite the softer tone from Williams captured by the FXS Speechtracker.

Indicator	Latest Value	Comment / Implication
GBP/USD spot level	Near 1.3260	Pound firmer in early Asian trade
Fed October 27-28 meeting odds	77.3% hold	Markets expect no change in policy rate
Fed December meeting odds	87.8% hike	High likelihood of one more increase
FXS Speechtracker score (Williams)	3.4/10	Softer than 5.8/10 historical average
FXS Fed Sentiment Index	133.86	Down 3.09 points, still hawkish overall

GBP/USD Technical Picture: Bias Stays Bearish Below 100-Day SMA

From a technical standpoint, GBP/USD is trading around the 20-period Bollinger simple moving average on the daily chart, but remains capped beneath both the 100-day simple moving average and the upper Bollinger band. This configuration maintains a bearish tilt in the near-term outlook.

The Relative Strength Index (RSI) stands at 44, pointing to limited upside momentum and suggesting that recent recoveries have lacked strength as the pair trades below the broader trend indicator. On the topside, resistance is clustered between the upper Bollinger band at 1.3375 and the 100-day simple moving average at 1.3395, an area where sellers are expected to reappear on rallies. Initial support is located around the lower Bollinger band near 1.3150, and a daily close below this area would likely open the door to further downside as bearish pressure builds.