Pound back above 1.33: what lies ahead as US inflation figures approach?

• GBP/USD regains 1.3300, ending three consecutive sessions of losses.
• Gilt yields soften despite reduced fiscal headroom in Chancellor Healey's maiden Budget.
• Thursday brings September's US core PCE inflation reading, with 3.1% expected.

A softer Dollar following the Fed's decision to keep rates unchanged lifted GBP/USD to its first advance in four sessions, with little contribution from Chancellor Healey's first Budget. Well before the Budget speech began, the pair had touched its session trough just above 1.3250, its weakest level since mid-October. Trading was largely unchanged during the speech; following the Fed, the pair is now just above 1.3300.

Despite new taxes on banks and gambling, Chancellor Healey's fiscal headroom for 2029-30 stands at £15 billion, against £24 billion in March, according to the Office for Budget Responsibility (OBR). Nevertheless, the 10-year gilt yield slipped. The OBR's Budget projections include about £14 billion in additional debt interest this year, almost matching the headroom. With the Pound losing ground to the Euro on the day, the rise in GBP/USD reflects Dollar weakness.

Keeping its rate at 3.75%-4.00%, the Fed pointed to the effects of its policy through comments from Fed Chair Warsh. He said credit had tightened since September, including higher borrowing costs for the technology build-out, demonstrating that the policy was working. During his question-and-answer session, the Dollar Index reached its session trough as GBP/USD hit its session peak.

Which releases could shape the next move?

The first US price and wage readings since the Fed's hold will help inform whether it raises rates in December. Due on Thursday at 12:30 GMT, September's core Personal Consumption Expenditures Price Index (PCE) is expected to show annual inflation of 3.1%, up from 3%. Headline inflation is projected at 3.6%, compared with 3.4% previously. Friday's third-quarter Employment Cost Index, also scheduled for 12:30 GMT, is forecast at 0.8%, following 0.9%.

With no UK releases scheduled before the weekend, the next domestic event for the Pound is the Bank of England (BoE) decision on 5 November. A rise in the UK's Bank Rate from 3.75% to 4.00% is anticipated by almost every research house.

What do the GBP/USD charts indicate?

Wednesday's decline to the session low retraced roughly half of GBP/USD's advance from just below 1.3150 on 14 October to just above 1.3400 on 22 October. The pair remains under its 50-day Exponential Moving Average (EMA), around 1.3350, and its 200-day EMA, slightly below 1.3400. It had traded around the latter from 20 to 22 October. Despite three consecutive losing sessions, daily momentum remains overbought.

Daily GBP/USD chart