British Pound catches bid as Fed’s Waller eyes a pause in October

The British Pound (GBP) experienced an increase of approximately 0.14% on Thursday as the US Dollar (USD) weakened, despite favorable US job data. However, Governor of the Federal Reserve (Fed), Christopher Waller's dovish remarks impacted the Greenback. At the time of publication, GBP/USD was trading at 1.3230 after reaching a low of 1.3184.

The US Labor Department reported Initial Jobless Claims for the week ending October 3 at 197K, lower than the anticipated 200K and down from the previously revised 199K print. Analysts cited by Reuters noted that the job market is "low-hire, low-fire," which is favorable for those already employed but challenging for job seekers.

Fed Governor Waller suggested that rate hikes may not occur consecutively, indicating a potential pause in October, although he also mentioned that additional hikes are likely to curb inflation. More recently, Fed minutes revealed that all members supported the September rate hike, and the board views the labor market as "stable and generally viewed... as close to maximum employment."

Consequently, money markets have priced out a probable Fed rate hike in October, with a slim 18% chance, while December remains at a high 87%. Bank of England (BoE) Governor Andrew Bailey emphasized that monetary policy should prioritize inflation and stressed the need for governments to tackle fiscal deficits in a speech at a conference in Turkey.

The BoE has an 83% probability of raising rates by 25 basis points by the end of the year, pushing the Bank Rate to 4%. If both the Fed and the BoE raise rates twice in 2023, the interest rate differential would remain unchanged, potentially boosting the appeal of the GBP, which has weakened due to US Dollar strength and concerns over fiscal instability.

Upcoming US economic data includes the University of Michigan Consumer Sentiment. On the daily chart, GBP/USD is trading at 1.3212, exhibiting a bearish near-term bias as it trades below a cluster of former support levels now acting as resistance. The 50/100/200-day Simple Moving Averages (SMA) cluster around 1.3443, which is significantly above the current price, reinforcing medium-term trend resistance.

Momentum is weak, with the 14-day Relative Strength Index (RSI) near 36, indicating persistent selling pressure but not yet extreme oversold conditions. The latest FXS Fed Sentiment Index stands at 137.91, suggesting a still-strong dollar backdrop is weighing on the GBP. On the upside, initial resistance lies at the former trend-line break near 1.3300, followed by downward-sloping resistance trend lines around 1.3425 and the SMA cluster at 1.3443.

To challenge the current bearish structure, a move toward prior rising-support break levels of 1.3568 and 1.3764 would be necessary. With no substantial technical support below the market and price testing recent lows, the pair remains susceptible to further downside until buyers can initiate a sustained recovery above the 1.3300 level.