Pound Sterling Awaits The Fed's Two-Strike Inflation Test

The real tension weighing on GBP/USD is a rate parity that masks a divergence. Both central banks sit at 3.75%. Federal Reserve (Fed) Chair Warsh's Jackson Hole speech two weeks back opened the door to a hike, with markets now pricing in over 60% odds that the Fed raises a quarter point on the 16th. The Bank of England's MPC (Monetary Policy Committee) voted 6–3 to hold at its July 30 meeting, with three members preferring a move to 4%. The BoE (Bank of England) faces the same energy shock that is pushing inflation toward 3.2% this year. The difference is that Fed Chair Kevin Warsh reads the inflation problem as unresolved. The BoE's split vote reads as exhaustion.

Cable's chart confirms the indecision. A rally from 1.3400 in early August ran out of gas near 1.3675 on August 21. The pair has ground lower for two weeks. The 1.3550 handle is the middle of August's range and sits as session-level support on Wednesday. Stochastic RSI is oversold but rolling over, a sign that the selling impulse has lost momentum. The 50-day and 200-day exponential moving averages cluster around 1.3550 and 1.3400, establishing two technical tiers. Resistance is 1.3650.

What moves Cable right now

Thursday's US Producer Price Index (PPI) and US Consumer Price Index (CPI) on Friday are the last two inflation reads before September 16. Core PPI is expected at 0.3% MoM and 3.3% YoY. Core CPI comes in at 0.2% MoM and 3.4% YoY expected. Both sit above the prior month. A hotter print extends Warsh's case for a hike and bids the Dollar higher. A softer print lets the market reprice rate cuts back in, and Sterling rallies with it.

The calendar also carries the usual noise: Initial Jobless Claims on Thursday at 205K expected, Existing Home Sales Thursday, and this week's UK Purchasing Managers Index (PMI) reading on Friday. The UK's own CPI print is due Friday, expected at 2.6% YoY, and it lands on the same day as the Fed (Federal Reserve) decision cascade. The BoE's own decision announcement comes September 17 at noon GMT (Greenwich Mean Time). Timing is the tell: UK inflation lands before the Bank of England decision, so a hot reading pushes the hawkish minority's case for a 4% hike at the MPC (Monetary Policy Committee) vote.

The trade setup

Resistance: 1.3650. Support: 1.3475, then 1.3400.

Cable breaks below 1.3475 on any CPI or PPI surprise higher, targeting 1.3400 and opening the door to a retest of August's 1.3350 low if the Fed raises and Cable round-trips. The invalidation is a break above 1.3650 on a softer inflation read and Fed pause repricing, which shifts the technical bias toward the 1.3675 August high and the 1.3700 handle.