Sterling Under Pressure: GBP/USD Slips Past 1.3550 Amid Hawkish Fed Rhetoric While Technical Outlook Stays Constructive

During early European trading on Tuesday, the GBP/USD pair dipped to approximately 1.3545. The selling pressure stems from hawkish comments made by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium, which bolstered the US dollar against the British pound.

In his inaugural Jackson Hole address on Friday, Warsh emphasized that inflation remains above the central bank’s 2% target. He stated that the Fed’s primary objective must be ensuring underlying inflation moves sufficiently toward their goal, warning that “otherwise, we have work to do.”

Market expectations for a September rate increase by the Fed surged to 65.4%, up from just under 40%, per the CME FedWatch tool. Economists suggest that the outcome will largely depend on the upcoming inflation data releases.

BoE Tightening Expectations Rise as Markets Await UK Budget

Strategists at Scotiabank note a shift toward more constructive market pricing for Bank of England tightening. Investors are currently pricing in a roughly 60% chance of a 25 basis point hike at the September 16 BoE meeting, alongside a cumulative 36 basis points of tightening by year-end. They added that the upcoming October 28 UK budget will be pivotal, stating it “will remain a key focus for markets over the next couple of months” as participants evaluate the nation’s fiscal stance amid the shifting policy landscape.

Warsh Signals Unfinished Inflation Battle, Sustaining Dollar Bullishness

Warsh delivered a distinctly hawkish message, achieving a 7.4/10 FXS Speechtracker score—well above the 6.5/10 historical average—which underscores heightened concerns over price stability. His insistence that the Fed must be “confident underlying inflation is moving to objective, or we have work to do,” combined with the assertion that financial conditions remain unhindered by policy restraint, signals a bias toward further tightening or a prolonged higher-for-longer stance. Furthermore, Warsh’s assertion that recent favorable inflation prints do not yet reflect a meaningful shift in underlying trends, paired with his steadfast commitment to the 2% PCE target, reinforces a narrative supportive of the dollar and broadly unfavorable for risk-sensitive assets.

The FXS Fed Sentiment Index remained unchanged at an elevated 129.70, maintaining a firmly hawkish policy narrative despite the absence of incremental shifts. The combination of an above-average Speechtracker score and a high Sentiment Index level indicates that markets will likely continue pricing in persistent Fed vigilance against inflation, suggesting further upside for the dollar and higher front-end yields.

Technical Analysis: GBP/USD Maintains Bullish Momentum Above the 100-Day SMA

On the daily chart, GBP/USD remains positioned above both the 100-day moving average and the lower Bollinger Band, keeping the near-term bias mildly bullish as the price holds within the upper half of its recent volatility envelope. A Relative Strength Index (14) reading of around 52 indicates neutral-to-positive momentum, suggesting that while buyers hold a slight edge, their conviction remains limited.

Upside resistance begins at the middle Bollinger Band near 1.3550, followed by the upper Bollinger Band at 1.3668. A sustained breach of these levels would pave the way toward 1.3700, which aligns with the February 9 high and serves as a key psychological threshold.

Immediate downside support sits at the August 28 low of 1.3526. Further contention is found at the 100-day MA near 1.3445, reinforced by the lower Bollinger Band at 1.3432; a daily close below this demand zone would undermine the current constructive outlook and expose the pair to deeper losses within its broader range.

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