GBP/USD Tumbles Below 1.3250 Amid Hawkish Fed Stance
The GBP/USD pair has weakened below 1.3250, and technical barriers are sustaining a bearish bias. The US Treasury yields have surged, and the Federal Reserve's (Fed) hawkish stance is providing support to the US Dollar (USD) against the British Pound (GBP).
Chicago Fed President Austan Goolsbee has warned that inflation remaining above the Fed's target represents a dangerous situation that may require policy action. Fed Governor Michael Barr also stated that further rate increases will likely be needed to slow inflation.
The markets are pricing in nearly a 47.1% chance of a Fed rate hike in October and a 92.5% chance of an increase in December, according to the CME's FedWatch Tool.
Analysts at HSBC warn that 'weak UK labour demand and sluggish private sector momentum could weigh on the GBP in the near term, particularly as the US economy is looking more resilient.' They note that markets are already pricing around 100bp of tightening from the BoE by July 2027, but caution that higher energy prices create a difficult policy mix: inflation risks are rising even as growth momentum faces a challenging outlook.