GBPUSD drops below 1.1800 on Fed’s Waller remarks

• GBPUSD dived from last week’s highs at around 1.1850s.
• Federal Reserve’s Waller: Could hike 50 bps at December’s meeting or the next one.
• After Waller’s remarks, the US Dollar rose, and the GBPUSD tumbled below 1.1800.
• The GBP to remain choppy trading, ahead of the UK’s budget.

The Pound Sterling tumbled from around last week’s highs above 1.1800 against the US Dollar (USD) after a Federal Reserve (Fed) official stated that a move of 50 bps is on the radar for the next meeting or the one after that. Therefore a risk-off impulse capped the GBP rally, bolstering the USD. At the time of writing, the GBPUSD is trading at 1.1734, below its opening price by 0.80%.

Fed's Waller hawkish remarks boosted the US Dollar

Amidst the lack of US economic data in the calendar, investors are leaning on Fed officials speaking, particularly on Christopher Waller. Waller said that the Fed “still has ways to go” hiking rates and commented that the US central bank could moderate the size of interest-rate increases to 50 bps at their December meeting or the one after that, and reiterated that the Fed is not close to pausing.

The market reacted negatively to the remarks, as the GBPUSD dropped below 1.1800, while the greenback bounced off, as shown by the US Dollar Index (DXY), rising 0.56%, at 107.031. Regarding US Treasury bond yields, following Friday’s holiday, the 10-year benchmark note rate reached a daily high at 3.904% before dipping towards 3.863%.

Meanwhile, the Pound Sterling is expected to trade choppy as investors await the UK’s budget on Thursday, as Chancellor Jeremy Hunt is expected to release a fiscally responsible package. Newswires reported that around 40% of the GBP 55 billion of savings would come from tax hikes and 60% from spending cuts.

According to the Scotiabank analysts, they spot key support at around 1.1550, but firstly, the GBPUSD needs to surpass 1.1625/35. On the upside, a break above 1.2045, it’s the first resistance level.

What to watch

On Tuesday, the UK economic calendar will release employment figures for September. On the US front, the New York Empire Manufacturing Index for November, the October Producer Price Index (PPI), and Fed speakers like Patrick Harker, Lisa Cook, and Michael Barr.

GBPUSD Price Analysis: Technical outlook

From a daily chart perspective, the GBPUSD is neutral-biased after rallying above the 100-day Exponential Moving Average (EMA). Notably, falling below the September 13 daily high at 1.1738 would open the door for further losses. Why? UK fundamental data would likely keep the GBP pressured so that the GBPUSD might test the 100-day EMA at 1.1652. Once cleared, the next support would be the psychological 1.1600 figure, followed by the October 5 daily high-turned-support at 1.1495.