Market Overview

At 04:20 ET (09:20 GMT) the GBP/USD pair slipped 0.16% to $1.3319, while the EUR/USD pair fell 0.21% to $1.1142. The moves were driven by hotter‑than‑expected U.S. inflation data and hawkish comments from Federal Reserve officials, which pushed the U.S. dollar toward its year‑high levels.

Federal Reserve Commentary

Federal Reserve Governor Chris Waller indicated he would support a 25‑basis‑point rate increase on 9 December and signalled the possibility of a 50‑basis‑point hike if October inflation remains hot for a third consecutive month. Following his remarks, short‑dated Treasury yields rose roughly 20 basis points, with the 2‑year yield up about 13 basis points and the 2s10s curve flattening by 7 basis points.

Inflation Data

Core CPI posted a 0.3% month‑on‑month increase, which annualises to a rate well above the 3% target. Markets are now pricing in more than a full 25‑basis‑point hike for December.

ING Analysis

ING’s senior rates strategist Michiel Tukker noted that a 0.3% monthly CPI rise translates to a yearly inflation figure above 3% and expects the 10‑year Treasury yield to return to 5%. He projects only a 25‑basis‑point hike for December and no further hikes in 2027, with the upcoming October PPI serving as the next catalyst.

Bank of England Perspective

Clare Lombardelli, Deputy Governor of the Bank of England and a member of the 8‑1 vote that raised the policy rate to 4% from 3.75%, said at a central‑banking conference that “the conditions for persistent inflationary dynamics over the medium term are crystallising.” She added she would not rule out a rate move in December or February, describing each meeting as “live.” In a separate interview with The Guardian, she reiterated that a December hike was not ruled out but that she lacked sufficient information to decide.

Currency Market Outlook

ING’s Chris Turner expects the dollar index to retest resistance around 102.85‑103.00; HSBC data placed the index at 102.20 on the previous Tuesday. Turner suggested that the EUR/USD support level of 1.1110 (the 50% retracement of the March‑January rally) is a likely profit‑taking zone for speculative short positions, and he sees a weak case for a bounce from this region.

ECB Expectations

ING forecasts the European Central Bank will match the Fed’s move by raising its policy rate to 2.75% on 17 December, though it anticipates a much shorter tightening cycle for the ECB. Turner expects EUR/USD to trade between 1.1140 and 1.1200 today and to press the lower end of a 1.10‑1.15 range by year‑end, despite typical December seasonality that favours the euro.

Market Consensus

A consensus from LSEG, cited by HSBC, projects the fourth‑quarter GBP/USD rate at 1.3346 and EUR/USD at 1.1250. Market liquidity may be thin as U.S. markets are closed for Veterans Day.