GBPUSD Drops to 1.3356 as a Hiking Fed Outweighs the BoE’s 4% Rate and Its 4.9% Inflation Path — 1.3250–1.3500 Range Into December

The pound fell to $1.3356 on Friday, down 0.7% on the day. Before the US jobs report it had traded at 1.3390, and the session high was 1.3463. The Bureau of Labor Statistics reported that the US economy added 165,000 jobs in October against a consensus of 70,000. September was revised up to 60,000 from 29,000, and unemployment fell to 4.1% from 4.2%. The dollar became the strongest currency in the G10 within minutes of the release. Cable is now back on the moving-average cluster that has capped and supported it since the summer.

The timing hurt sterling. Twenty-four hours earlier the Bank of England had raised Bank Rate by 25 basis points to 4%, its first increase since August 2023, on an 8–1 vote. Catherine Mann voted for 50 basis points. The Bank now expects inflation of 4.9% by the second quarter of 2027, and several members said more tightening is likely. Sterling still ended Thursday at 1.3467, virtually unchanged, and Friday wiped out the six-session rally that had carried it from the 1.33 area to 1.3490.

Our thesis is that sterling’s rate support depends on an oil price that is already falling, and a Federal Reserve that is still hiking matters more to cable than a Bank of England that has just finished its first move. The Bank built its November forecasts on Brent futures averaging $108 a barrel in the 15 working days to October 27. Brent is trading at $97.02 today, 10% lower. Every dollar of that decline weakens the case for a second UK hike, while the US labour market keeps the case for a December Fed hike alive. When oil fell 8% on Wednesday, UK two-year swap rates dropped 8 to 10 basis points and US two-year swaps dropped 5. The differential moved against the pound on a day that looked like good news for Britain.

That asymmetry sets the forecast. Peace in the Gulf, which the market has spent the week pricing, is not clearly bullish for the pound, because it removes the energy shock that justified the Bank’s hike. Escalation lifts UK inflation but also lifts the dollar through haven demand and a Fed that would have to stay hawkish. Cable is caught between two forces, both of which favour the dollar.

Our base case through the Fed decision on December 9 and the Bank of England meeting on December 17 is a range of 1.3250 to 1.3500, with a midpoint of 1.3375. A hot US inflation print on Tuesday and a Fed hike would send the pair back to the October 14 low of 1.3137, 1.6% below the current price. Upside beyond 1.3550 needs a soft US inflation number and a Bank of England that signals February is fully committed. Cable is now trading on US data, and that leaves the near-term risk pointing lower.

Six Days Up, One Day Down: How the Week Unfolded

Sterling entered the week on a strong footing. On Friday, October 30, it rose 0.4% to $1.3429 and was the best-performing major currency that day. That completed a fourth straight weekly gain against the dollar. The euro-based picture was stronger still: GBP/EUR fixed at 1.1993 on October 30, its highest reference rate since March 28, 2025, and its fifth straight weekly gain. Sterling has risen 3.2% against the euro from its September 3 low of 1.1620.

The first half of the week was about Washington, not London. Democrats won both chambers of Congress on Tuesday, and the dollar gave up ground as traders priced a faster end to the Iran war and lower oil. Cable extended its run to six consecutive daily gains. By early European trading on Thursday it was trading at 1.3490, its best level in more than a month and 2.7% above the October 14 low of 1.3137.

Thursday morning brought the first signs of fatigue. Sterling slipped 0.10% to $1.3458 before the decision as the dollar’s post-election slide paused with the dollar index near 101.5. The hike was almost fully priced. Prediction markets had a 25-basis-point increase at 95% in the days before, and swap markets had already priced a second move by February. The bar for a hawkish surprise was high, and the Bank did not clear it. The pair spiked on the announcement, met strong US data and hawkish comments from Fed officials, and closed at 1.3467.

Friday started badly and got worse. A sell-off in technology shares that began in New York on Thursday, when the Nasdaq fell 5.52%, spread to Asia overnight. Japan’s Nikkei lost 6.7%, and Korea’s KOSPI fell 8.7% and triggered a circuit breaker. Investors moved into cash, and in currency markets that meant dollars. Sterling was down 0.54% at $1.3391 by 05:40 ET. The payrolls report then took it below 1.34 and down to 1.3356.

For the week, cable has lost 73 pips from the October 30 close of 1.3429, a decline of 0.5%. The headline number understates how violent the week was. From the Thursday morning high of 1.3490 to Friday’s low near 1.3356, the pair dropped 134 pips in less than two sessions, and the entire post-election rally disappeared. The euro fared worse, falling 0.64% to 1.1147 against the dollar on Friday, so sterling’s losses reflect dollar strength rather than a UK story. The pound was a passenger this week. US payrolls and the AI sell-off decided where it went.

The Bank of England Hike: 4%, 8–1, and an Inflation Path Toward 4.9%

The Bank of England’s November Monetary Policy Summary confirmed what the market had expected for a month. At its meeting ending on November 4, the Monetary Policy Committee voted 8–1 to raise Bank Rate by 0.25 percentage points to 4%. Bailey, Breeden, Dhingra, Greene, Lombardelli, Pill, Ramsden and Taylor voted for the quarter point. Mann preferred 0.5 points, to 4.25%. The decision ends a run of six consecutive holds that began after the December 2025 cut to 3.75%.

The inflation forecast drove the decision. UK CPI was 3.5% in September, up from 3.1% in August and 2.9% in July. The Bank’s staff now expect CPI at 4.5% in the first quarter of 2027 and 5% in the second quarter, 1.25 percentage points above the July projection. The Monetary Policy Report projects 4.9% for 2027 Q2 and does not see inflation returning to the 2% target until late 2028. Direct energy effects contributed 1 percentage point to September’s CPI. The October Budget measures are expected to take 0.25 percentage points off inflation by mid-2027.

The individual statements matter more for sterling than the vote. Pill said one 25-basis-point hike is unlikely to be enough. Greene said additional increases will probably be required. Lombardelli said a further near-term increase is likely unless inflation pressures weaken. Bailey said he sees the argument for another increase but prefers a conditional approach that depends on energy prices and inflation dynamics. Breeden said further tightening would be needed if energy prices stay high. Taylor said this is not the start of a hiking cycle and called the move insurance. He said the next move could be up, down or sideways.

Mann’s case for 50 basis points was the most hawkish statement from the Committee in three years. She argued that the economy has crossed into a high-inflation, tight-labour-market regime in which households and firms respond to price rises with stronger second-round effects. She cited five years of above-target inflation averaging 4.7% and a substantial inflation risk premium in the gilt curve. Her earlier quarter-point votes, she said, were a down payment.

The Committee as a whole stayed with the language that matters for markets: “Monetary policy is not on a pre-set path.” The Bank’s Market Participants Survey median shows Bank Rate at 4% after this meeting and 4.25% in February. That path sits below the short-term rate curve, which means traders are pricing more tightening than the professional forecasters expect. For sterling, the meeting delivered exactly what was priced and confirmed one more hike at most. Four members leaning toward another move and four leaning toward caution is a split that the next set of data will settle. A currency that has already priced the hawks gets little from that.

Why Sterling Fell on a Hawkish Hike

A hike that a central bank telegraphs for six weeks rarely lifts a currency on the day. Traders had priced the move at 81% by October 7 and at 85% by the middle of the month. By the week of the meeting, the question was not whether the Bank would hike but whether it would signal a sequence. It signalled a conditional path, and the pound gave back its pre-meeting gains.

The pricing on February had already done the work. Swap markets fully priced a February increase before Thursday, so the statements from Pill, Greene and Lombardelli confirmed a move the market already owned. Taylor’s comment that this is not the start of a cycle and Bailey’s preference for a conditional approach gave traders reasons to doubt that a third hike would follow. For a currency, the terminal rate matters more than the next step, and the Bank did nothing on Thursday to raise the expected terminal rate.

The Fed’s response came on the same day. Fed officials spoke hawkishly on Thursday afternoon, and US data that morning showed labour costs still running hot. The rate differential that matters for cable is the gap between the two central banks’ expected paths, not the level of Bank Rate. With the Bank of England at 4% and the Fed funds target at 3.75% to 4.00%, Bank Rate now sits 12.5 basis points above the Fed’s midpoint of 3.875%. If the Fed hikes on December 9, the Fed’s midpoint moves to 4.125% and the gap reverses in favour of the dollar before the Bank of England meets again in February.

The oil-price arithmetic works against the Bank’s hawks. The November forecast assumed Brent at $108 and UK natural gas at 216 pence a therm, 38% and 81% above the July assumptions. Brent closed at $94.62 on Wednesday and trades at $97.02 today. The forecast that justified the hike rests on an energy price 10% above the current market. If oil holds below $100 through December, the next Monetary Policy Report will show a lower inflation peak, and the case for a February hike weakens with it.

The reaction also had a mechanical side. Sterling had rallied for six straight sessions into the meeting, partly on hike expectations. Positioning was long, and the event had passed. Traders took profits as soon as the statement confirmed the priced outcome, and Friday’s payrolls report hit a market that was already reducing exposure. The pound did not fall because the Bank was dovish. It fell because the Bank told the market nothing it had not already paid for.

US Payrolls: 165,000 Jobs and a December Fed Hike Back in Play

Friday’s Employment Situation report from the Bureau of Labor Statistics was the strongest US labour release in months. Non-farm payrolls rose 165,000 in October, more than double the 70,000 consensus. September’s figure was revised up to 60,000 from 29,000, adding 31,000 jobs to the prior estimate. The unemployment rate fell to 4.1% from 4.2%. Average hourly earnings rose 0.4% on the month, ahead of the 0.3% forecast.

The breadth of the gain matters. Professional and business services added 70,000 positions, finance added 7,000, and information lost 1,000. Employers hired across most sectors. A labour market near full employment with wages accelerating gives the Fed room to keep focusing on inflation, and the Fed has made clear that inflation is its priority. September’s PCE price index rose 3.6% from a year earlier and 0.5% on the month, with core at 3.1%. Third-quarter GDP grew at an annualised 3.4%, up from 2.2% in the second quarter.

The Fed under Chair Kevin Warsh raised rates to 3.75% to 4.00% on September 16, the first increase since 2023, and held on October 28 by a 10–2 vote, with two members preferring another hike. After Friday’s data, futures put the odds of a December 9 hike at 74.8%. The two-year Treasury yield trades at 4.54% and the ten-year at 4.90%. Front-end yields had fallen during the AI sell-off as investors looked for safety. The jobs report reversed that move and pushed yields back up across the short end of the curve.

For cable, the payrolls report changed the balance of the month. Before Friday, the case for dollar weakness rested on the midterm result, lower oil and the equity rout. Each of those had a credible link to fewer Fed hikes. The jobs data broke that link. A Fed that hikes in December while the Bank of England waits until February gives the dollar the rate advantage for at least two months, and the dollar also carries the haven bid from the equity sell-off.

The next test arrives on Tuesday, when the October consumer price index is released. The Fed’s reaction function is built around inflation, so CPI will carry more weight for the December decision than payrolls. A core reading at or above 0.3% on the month would lock in the hike and push cable toward 1.3250. A soft reading would bring the odds back toward 50% and let the pair recover toward 1.3435. The Bureau of Labor Statistics data has put the burden of proof on inflation, and the pound has to wait for it.

The Dollar’s Two Engines: Rates and Risk Aversion

The dollar is unusually well supported because it is benefiting from two separate forces. The first is rates. The Fed is in a hiking cycle, its policy rate of 3.75% to 4.00% already matches most of its G10 peers, and Friday’s data points to one more hike in December. One-week dollar deposit rates near 4% give investors a return for holding cash while equities fall. The ECB’s deposit rate is 2.50%, so the dollar holds a 137.5-basis-point carry advantage over the euro at the Fed’s midpoint.

The second force is risk aversion. Thursday’s 5.52% drop in the Nasdaq and the 4.36% fall in the S&P 500, the worst day since April 2025, came on fears about AI and data-centre regulation after the Democratic sweep. The selling then hit defensive sectors. Investors rotated into cash rather than out of the dollar, and the dollar index held its ground through the rout. The index is now trading in a 101.50 to 102.50 range, and dealers expect it to settle toward the middle of that band.

That combination is difficult for cable. In a normal risk-off episode, sterling suffers because the UK runs a current-account deficit and depends on foreign capital. In a normal rate-driven dollar rally, sterling can hold up if the Bank of England is also hawkish. This week combined both, and the pound lost on both counts. On Friday, the dollar was the best-performing G10 currency, and sterling and the euro fell 0.7% and 0.64% respectively.

The post-election dollar weakness did not last because rates never moved against the dollar. Strategists argued before the Bank of England meeting that rates would have to start moving against the dollar to justify a bigger decline, and the oil sell-off showed why they did not. Falling crude cut European and UK rate expectations more than US expectations. The US is a net energy exporter and the UK is a net importer, so a lower oil price is more disinflationary for Britain than for America.

For the forecast, the dollar’s two engines point in the same direction until one of them stalls. A soft US CPI print on Tuesday would weaken the rate engine. A recovery in equities would weaken the haven engine. Without either, cable will struggle to hold above the 1.3350 support zone. With both, the pair could return to the top of its range. Right now, neither is weakening, and the dollar has momentum into the December Fed meeting.

UK Fundamentals: Strong Surveys, Weak Housing, Sticky Wages

The UK data heading into the Bank’s decision was mixed, and that explains why four members want more evidence before a second hike. The October flash composite PMI rose to 53.1, an eight-month high. The Bank said recent growth has been stronger than expected, though members judged that it will fall back somewhat in the coming quarters. Activity is holding up better than the energy shock implied, and that strength gave the hawks their case.

The labour market is stabilising rather than tightening. Unemployment is 4.7%, and regular pay growth is 3.7%. Greene puts underlying wage growth at 3.5%. Ramsden said private-sector wage growth has stopped declining and slack is levelling off. Bailey said the labour market appears to be stabilising. That is not the profile of an economy at risk of a wage-price spiral, but it is not loose enough to let the Bank ignore a 5% inflation peak.

Inflation is broadening from energy into services. September headline CPI was 3.5%, core was 2.8%, and services inflation rose to 3.7% from 3.4%. Services inflation is the measure the Bank watches most closely for second-round effects, and its rise justifies the hawks’ concern. Core at 2.8% shows that the bulk of the overshoot is still energy, which supports the doves’ view that the shock could fade.

Housing is where the hike will bite first. Benchmark two-year mortgage rates have risen by nearly 50 basis points since the start of September. Mortgage approvals fell to 53,400 in September, below the six-month average of 58,800. Net consumer credit slowed to £1.9 billion from £2.7 billion. Nationwide house prices rose just 0.5% from a year earlier in October, the slowest annual pace since January 2024. Average five-year fixed mortgage rates reached 6.00% in early October.

For sterling, the fundamentals give the Bank enough reason to hike once more but not enough to commit to a cycle. A UK economy with an eight-month-high PMI, 3.7% services inflation and a weakening housing market is one where each data release will move rate expectations. The October labour figures and third-quarter GDP, both due before the December 17 meeting, will decide whether February stays fully priced. A miss on either would remove the last part of sterling’s rate support, and the pound has little else to rely on against a hiking Fed.

Gilts, the Budget and the Fiscal Premium

The fiscal risk that dominated sterling in early October has eased but not disappeared. The 30-year gilt yield rose above 6% on October 1 and peaked at 6.034% on October 7, its highest level since 1998. The 10-year yield reached a 19-year high of 5.527% in early October. Sterling hit its lowest level of 2026, $1.3137, on October 14, as rising yields became a sign of fiscal stress rather than a reason to own the pound.

Chancellor John Healey’s first Budget on October 28 took that pressure off. The government stuck to its fiscal rules, the market reaction was muted, and the 10-year gilt yield fell 2.1 basis points to 5.321% on the day. Sterling slipped 0.1% to $1.3291 during the speech and recovered over the following two days. The Debt Management Office projected gilt supply of £250.6 billion, close to the £249.2 billion consensus. The net financing requirement for 2026–27 rose by £7.4 billion to £258.6 billion. Fiscal headroom shrank to £15 billion, leaving a thin buffer against further shocks.

The Budget was designed to avoid surprises, and it succeeded. Medium-term decisions were deferred to next year’s Spending Review, and the current medium-term path remains politically difficult. The government took office under Prime Minister Andy Burnham, who became Prime Minister on July 20, and gilt yields jumped on the change of leadership. Markets have since accepted that fiscal policy is on hold. The risk premium in long-dated gilts has fallen, but it has not gone away.

The link between gilts and the pound depends on why yields move. When yields rise because the Bank is expected to tighten, sterling usually gains. When they rise because of fiscal concerns or a global bond sell-off, the pound tends to follow the dollar lower. In early October, the 30-year gilt rose above 6% at the same time as US Treasury yields hit a 24-year high, and sterling fell 0.48% in a day. The 10-year gilt yield of 5.321% sits 42 basis points above the 4.90% US 10-year, a premium that reflects fiscal risk more than monetary policy.

The next fiscal checkpoint is the October public finances release on November 20 at 07:00 GMT. A borrowing overshoot would revive questions about the £15 billion headroom and push long-dated gilt yields higher in a way that hurts the pound. For now, the fiscal premium is a background risk rather than an active driver. It would reactivate if UK inflation or the Fed pushes global yields higher again, and that is the scenario in which cable falls toward 1.3137.

Washington and Tehran: The Event Risks for Cable

The two largest event risks for the pound in the next six weeks are both in the United States. The first is the outcome of US-Iran talks. Tehran has offered to reopen the Strait of Hormuz within two days if Washington meets seven demands, including an end to the naval blockade of Iranian ports. Mediators in Qatar, Pakistan and Saudi Arabia are carrying messages between the two sides, and Oman is working on a joint mechanism to control commercial traffic. At least five vessel incidents have been reported in the Gulf since Sunday.

The second is what the administration does in the lame-duck window. The new Congress takes office on January 3. Some forecasters expect a limited US strike on Iran between mid-November and mid-December, before Democrats can use their majorities to restrict funding or authorization. One estimate puts the chance of fighting resuming at 80%. The market spent this week pricing the opposite outcome, and oil’s 12% to 16% weekly fall shows how far that bet has run.

For cable, both outcomes carry dollar strength. A signed deal sends oil lower, removes the UK inflation premium and weakens the Bank of England’s case for February. That pushes UK rates down faster than US rates and drags the pound toward 1.3250. A strike sends oil higher and lifts UK inflation, but it also triggers a haven bid for the dollar and keeps the Fed on a hiking path. In that scenario, the pound would fall with risk assets, as it did in March, before any Bank of England response could help.

The one outcome that favours sterling is the middle path: talks drag on without a deal, oil settles between $90 and $105, and the Bank’s inflation forecasts hold. That keeps February fully priced and limits the rate disadvantage from a Fed hike. It is also the most likely scenario for oil in the next six weeks. The pound’s best chance of holding above 1.3350 is continued uncertainty in the Gulf.

The domestic political picture in Washington adds a second layer. The Democratic majorities in both chambers introduce budget and regulatory uncertainty for 2027, which triggered the AI-sector sell-off on Thursday. If that sell-off deepens, haven flows into the dollar would continue. If it stabilises, the dollar would lose one of its two supports. Cable traders now have to watch Tehran, the White House and the Nasdaq as closely as Threadneedle Street.

The Technical Map: 1.3349–1.3362 Support, 1.3435–1.3475 Resistance

GBP/USD is trading at its most important technical level of the past three months. The 50-day, 100-day and 200-day simple moving averages have converged at 1.3362, and the 20-day average sits at 1.3349. Friday’s decline took the pair to 1.3356, directly into that cluster. A daily close below 1.3349 would be the first close below all four averages since the October 14 low and would confirm that the post-Budget recovery has ended.

Below the cluster, the next support is 1.3250. That level marks the bottom of the range traders set for this week and the zone where the pair consolidated in early October. A break below 1.3250 opens the October 14 low of 1.3137, which is also the 2026 low. A close below 1.3137 would put the pair at its weakest level since the 1.3116 low posted in October 2025 and target the 1.3000 round number. From the current price, 1.3250 is 0.8% lower and 1.3137 is 1.6% lower.

Resistance starts at the 1.3435 to 1.3475 band. Before the meeting, technical analysts identified that zone as the confluence of prior support, the 200-day average on some measures, and the upper trendline of a rising wedge pattern. Thursday’s high of 1.3490 and Friday’s session high of 1.3463 both failed inside or just above that band. A daily close above 1.3500 would invalidate the wedge and open 1.3550, which is 1.5% above the current price.

Above 1.3550, the next level is the May 6 high of 1.3643, and the 2026 high of 1.3867 posted on January 27 sits 3.8% above today’s price. Reaching those levels would need a sustained fall in the dollar index below 101.50, which is not consistent with a Fed preparing to hike. On the weekly chart, the pair has traded between 1.3137 and 1.3643 since May, and the midpoint of that range is 1.3390, where cable stood before Friday’s payrolls report.

Momentum turned on Friday. The six-day rally into Thursday ended with a failure at 1.3490, and Friday’s 107-pip drop from the session high of 1.3463 to 1.3356 broke the short-term uptrend. A rising wedge that breaks lower usually retraces to its starting point, which for this pattern is the 1.3137 low. Traders now treat 1.3349 to 1.3362 as the pivot. Above it, the range holds. Below it, the measured target is the October low.

Scenario Map: 1.3550 Upside, 1.3250–1.3500 Base, 1.3137 Downside

Our forecast covers the period to the Fed decision on December 9 and the Bank of England meeting on December 17, with three scenarios.

The base case, at 50% probability, is a range of 1.3250 to 1.3500, with a midpoint target of 1.3375. In this scenario, US October CPI comes in close to consensus, the Fed hikes on December 9 as priced, and the Bank of England holds at 4% on December 17 while keeping February fully priced. Oil trades between $90 and $105 as US-Iran talks continue without a signed agreement. The rate differential moves slightly in the dollar’s favour for two months but does not widen further. Cable oscillates around the 1.3349 to 1.3362 cluster, with rallies capped at 1.3475 and dips bought near 1.3250.

The bearish case, at 30% probability, is a return to the October low of 1.3137, 1.6% below the current price. US core CPI would need to rise 0.3% or more on the month on Tuesday, lifting December Fed hike odds above 90% and putting a January or March move in play. Oil would fall below $90 on a signed US-Iran deal, cutting the UK inflation forecast and pushing traders to price out the February hike. The AI equity sell-off would deepen and sustain haven demand for the dollar. A close below 1.3137 would extend the decline toward 1.3000.

The bullish case, at 20% probability, is a break to 1.3550, 1.5% above the current price. US CPI would need to come in soft, cutting the December hike odds below 50%. The Bank of England’s hawks would have to win the argument, with October labour data and Q3 GDP strong enough to price a second hike in February and a third later in 2027. Equities would need to recover enough to remove the haven bid. In that scenario, cable would reclaim 1.3500 and test the May high of 1.3643 by the end of December.

From 1.3356, the risk is skewed lower. The bearish target is 1.6% away, and the bullish target is 1.5% away, but the bearish scenario carries 10 percentage points more probability. The base-case midpoint of 1.3375 is just 19 pips above the current price. The signals that will decide the outcome, in order of importance, are Tuesday’s US CPI, the Fed’s December 9 decision, oil and the status of US-Iran talks, the UK October labour report and Q3 GDP, and the November 20 public finances release.

Verdict: Neutral-to-Bearish, Sell Rallies Into 1.3435–1.3475, Target 1.3250

GBP/USD at 1.3356 has given back its entire post-midterm rally in less than two sessions. The pair rose for six straight days to 1.3490 early on Thursday, held steady through the Bank of England’s first hike since 2023, and then fell 0.7% on Friday after a US jobs report that showed 165,000 new jobs against a 70,000 consensus. It is down 0.5% for the week and sits on the 1.3349 to 1.3362 moving-average cluster that has defined the range since the summer.

The Bank of England delivered a hawkish hike that the market had already paid for. Bank Rate rose to 4% on an 8–1 vote, inflation is forecast at 4.9% by mid-2027, and Pill, Greene and Lombardelli all point to another increase. February is fully priced, but Bailey, Taylor, Dhingra and Ramsden have not committed. The forecast that justified the hike assumed Brent at $108, while Brent trades at $97.02. Every week that oil stays below $100 weakens the second hike, and an oil decline lowers UK rate expectations faster than US expectations.

The Federal Reserve is the stronger force. A December 9 hike is priced at 74.8%, unemployment is 4.1%, wages rose 0.4% in October, and core PCE inflation is 3.1%. The dollar is supported by both rates and haven demand from the AI equity sell-off. If the Fed hikes before the Bank of England moves again, the dollar takes the rate advantage into February. A US-Iran peace deal would cut UK inflation and rate expectations, and a renewed strike would trigger a haven bid for the dollar. Neither outcome helps the pound in the near term.

Our call is neutral-to-bearish. We would sell rallies into the 1.3435 to 1.3475 resistance band, with a first target of 1.3250, 0.8% below the current price, and an extended target of the 1.3137 October low if Tuesday’s US CPI confirms the December hike. A daily close above 1.3500 would invalidate the view and open 1.3550. The base-case range into the December 17 Bank of England meeting is 1.3250 to 1.3500, with a midpoint of 1.3375. Cable is trading on US data now, and until US inflation slows or oil stabilises above the Bank’s assumptions, the dollar sets the direction.

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