British Pound drifts lower below 1.3500 as Fed hike bets rise, UK jobs data loom

The British Pound experienced a decline below 1.3500 during Asian trading hours on Tuesday, as traders anticipated a potential US Federal Reserve interest rate hike, scheduled for Wednesday. This market movement was primarily influenced by the UK's upcoming jobs report and the Bank of England's interest rate decision on Thursday.

Inflation data from the United States, revealing a higher-than-expected increase in the core Consumer Price Index (CPI) for August, strengthened expectations of a Fed rate hike. This, in turn, bolstered the US Dollar against the British Pound. Fed Chairman Kevin Warsh will deliver a press conference after the Federal Open Market Committee (FOMC) meeting on Wednesday, where any dovish remarks could weaken the USD and provide support to the GBP.

Conversely, hawkish comments from Fed officials could potentially strengthen the USD. The Bank of England is expected to maintain current interest rates on Thursday, despite the surge in oil prices, driven by concerns about lasting domestic price pressures. Financial markets now price a 30% chance of a quarter-point rate hike at the BoE meeting, up significantly from earlier expectations.

Analysts highlight a "relatively heavy" UK data calendar in the coming days, including Tuesday's jobs report, Wednesday's CPI, and Friday's retail sales. Despite high-profile discussions on potential higher taxes on banks, political developments in the UK have remained limited. The primary medium-term risk to the Pound Sterling, according to strategists, is the upcoming fall budget, scheduled for October 28.

The daily chart of GBP/USD indicates a neutral near-term tone, trading between the 20-day Bollinger middle band and overhead resistance at 1.3557. A move above this level could propel the pair toward the next resistance hurdle near 1.3660. Conversely, a break below the lower Bollinger band at 1.3455, combined with the 100-day moving average at 1.3445, could revert the pair's bias to the bears.