GBP/USD Extends Losses as Hot US Inflation Boosts Dollar

Traders' Opinions

Summary:

GBP/USD extends its decline as stronger US inflation and hawkish Fed expectations support the Dollar. However, BoE tightening signals and hopes for US-Iran diplomacy could limit losses above 1.3300.

SELL GBPUSD

EXP

TRADING

1.33150

Entry Price

1.31950

1.34700

1.32779 -0.00652 -0.49%

0.0

Pips

Flat

1.31950

Exit Price

1.33150

Entry Price

1.34700

GBP/USD remains under pressure for a second consecutive session, retreating from an intraday recovery toward 1.3355 and moving closer to the one-and-a-half-week low recorded on Tuesday. The pair is trading above the psychological 1.3300 level, with renewed US Dollar strength weighing on Sterling, although opposing monetary policy signals are preventing a more decisive downside move.

The Greenback has extended its recovery following hotter US consumer inflation figures, which have strengthened expectations that the Federal Reserve could adopt a more aggressive tightening approach. Markets have also started considering the possibility of a larger 50-basis-point rate increase in December after Fed Governor Christopher Waller delivered hawkish remarks on Tuesday. This shift in rate expectations is providing additional support to the Dollar and keeping GBP/USD on the defensive.

Geopolitical developments are also contributing to demand for the US currency. Continued tensions between Washington and Tehran, alongside reports of tanker attacks in the Strait of Hormuz, have sustained safe-haven demand. However, optimism surrounding a potential diplomatic breakthrough to end the conflict could undermine the Dollar's defensive appeal and limit further losses in GBP/USD if negotiations make meaningful progress.

On the Sterling side, the Bank of England's relatively hawkish position is offering some support. Deputy Governor Clare Lombardelli indicated that further interest rate increases remain a possibility, citing persistent energy-related inflation pressures and resilience in the UK economy. This monetary policy outlook provides a counterweight to the Dollar's strength, making the 1.3300 level particularly important. A decisive break below this threshold would strengthen the bearish outlook, while continued support above it could leave the pair vulnerable to another recovery attempt.

Technical Analysis

GBP/USD is showing renewed selling pressure after failing to sustain its recovery towards the 1.3450–1.3460 resistance region. The latest price action suggests that sellers have regained control, with the pair now trading around 1.3317 after breaking below an important support area.

The 1.3340–1.3355 zone is particularly important. This region previously acted as support during the October recovery but has now been breached, potentially turning into resistance. The inability of buyers to defend this area strengthens the bearish structure and suggests that previous support may now attract sellers on any corrective rebound.

Looking at the broader H4 structure, the rejection from the 1.3450 region has established a sequence of lower highs, indicating weakening bullish momentum. The recent decline also suggests that the recovery from the 1.3170 area may have been a corrective move rather than the beginning of a sustained bullish reversal.

As long as GBP/USD remains below 1.3340–1.3355, the downside outlook remains favourable. A corrective move towards this broken support zone could provide another opportunity for sellers to enter the market.

On the downside, 1.3200 represents the next important target area, followed by the broader demand zone around 1.3170–1.3185. This region could attract buying interest, particularly if sellers begin taking profits after the recent decline.

A sustained recovery above 1.3355 would weaken the immediate bearish outlook, while a stronger move above 1.3450 would invalidate the current bearish structure.

I favour further downside in GBP/USD, with the former support region around 1.3340–1.3355 likely to act as resistance. However, I would prefer to see a corrective retest or continued bearish confirmation before committing to a short position.

TRADE RECOMMENDATION

SELL GBP/USD

ENTRY PRICE: 1.3315

STOP LOSS: 1.3470

TAKE PROFIT: 1.3195

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