Pound Tumbles as Fed Rate Hike Bets Surge

The British pound is on track to fall further against the dollar as markets adjust to a potential September rate rise at the Federal Reserve. The pound-to-dollar rate has been experiencing a near-term pullback, breaking through the support zone at 1.3506 over the past 24 hours.

This suggests that there's not enough interest in this region to resist the selling pressure, and momentum is consistent with lower levels. The RSI sits at 46 and is pointed lower, confirming this assessment.

Analysts believe that a September hike by the Fed is now more likely due to its new assessment of inflation dynamics. Nick Kennedy at Lloyds Bank says that the Fed will likely gloss over soft headline jobs data, focusing on inflation persistence instead.

This shift in market odds has driven U.S. bond yields higher, making them relatively more attractive than equivalent yields elsewhere. The dollar is strengthening as a result, and this could lead to further losses for the pound before real support sets in.