The Pound sits still through a hawkish hearing and the priciest gilt sale

GBP/USD trades just under 1.3550 after a session that spanned 40 pips and returned two-tenths of a pip. The Bank of England (BoE) sent four Monetary Policy Committee (MPC) members to the Treasury Committee on Tuesday afternoon, and the hawkish score attached to the testimony on the economic calendar read 7.2 against a 6.0 average. The Pound's answer was to go back where it started. Sterling is not being paid for British rate expectations at the moment, and Friday's American inflation print is the reason.

A hearing about a report the market traded in August

The session covered the July Monetary Policy Report and the decision to hold Bank Rate at 3.75%. One of the four witnesses voted in July to raise rates and three voted to hold, a split that has been on the record since the minutes. The Governor told members that inflation risks point upward and that Britain is not close to a recession. He also asked the committee to drop the idea that the Bank has an unconditional plan to raise rates.

That request is the only new information in an afternoon of evidence, and it argues against the curve rather than with it. Swaps fully price a quarter point by December and a second by March 2027. Every one of the 65 economists in a Reuters survey conducted September 4-8 expects a hold on September 17, and 57 of them expect nothing further this year. The scale scored the testimony hawkish and the Governor spent the afternoon arguing with it.

A rate curve priced off a tanker route

The Governor also supplied the market's own explanation for its pricing, which is concern about further energy price rises. Brent Crude Oil trades near $98.00 and British natural gas sits at its highest since late 2022, both of them functions of a war running since February. A central bank lifting rates into an imported cost shock is responding to a price it does not set, which is why the curve can steepen without the currency moving.

The gilt market priced the same problem on Tuesday and charged more for it. Britain sold a 30-year bond at 5.82%, the costliest gilt sale since records began in 1998, with the 30-year yield at levels last seen that year. Bloomberg Economics puts the government's fiscal headroom at roughly half the £23.6 billion available in the spring, ahead of an October 28 Budget. The Chancellor promised fiscal discipline and honesty about spending restraint in his first major speech on Monday. The syndication priced it on Tuesday.

The cross tape reads the same way. Sterling was softer against most of its major peers through the testimony, and the Euro cross rebounded off a six-day low as the afternoon wore on. A hawkish reading of the Governor did not buy the Pound anything against the Dollar and did not buy it anything against the Euro either.

Wednesday is a rounding error and Friday is the week

Wednesday carries one release across all three currencies, a four-week average of a private payroll estimate at 12:15 GMT after 11.75K. Thursday is the first real test, with the Producer Price Index (PPI) at 12:30 GMT seen at 0.4% on the month after a flat July and 5.3% YoY after 4.7%, the core rate at 4.6% YoY after 4.2%, and initial jobless claims at 205K after 206K. The European Central Bank (ECB) is expected to lift its deposit rate the same day, which hands Sterling a second front.

Friday carries both legs of the pair. July Gross Domestic Product (GDP) lands at 06:00 GMT and is seen flat after 0.3%, with industrial and manufacturing production expected to add 0.1% each after falls of 0.2% and 0.5%, and the Bank's consumer inflation expectations survey follows at 08:30 GMT after a 4% reading. The August Consumer Price Index (CPI) arrives at 12:30 GMT, seen at 0.4% on the month after 0.1%, with the annual rate steady at 3.4% and the core rate easing to 2.4%. The Pound's own data lands six and a half hours before the number that prices it.

Levels and bias

Resistance: The 1.3550 line capped the session again, with Tuesday's high a few pips through it during the hearing and back beneath it within the hour. Above that, 1.3600 is the level that gave way in the final days of August, and the August peak short of 1.3700 caps the range.

Support: The 1.3500 handle is the floor the pair has defended for four sessions, with the 50-day Exponential Moving Average (EMA) sitting just beneath it. Below that, 1.3450 is open ground down to the 200-day EMA just above 1.3400.

Bias: Bearish while 1.3550 caps. Price has gone sideways for four sessions while the daily Stochastic Relative Strength Index (Stoch RSI) has fallen from above 90 to near 30, which is a grind that has stopped paying rather than a base building. The Friday risk is one-sided. A firm American inflation print restores the September hike and sells the pair, and a soft one buys a cut that is not in anybody's pricing. A daily close above 1.3550 invalidates the call, with 1.3450 the first objective on a break of 1.3500.

GBP/USD daily chart