The pound fell for the fourth consecutive trading day against the dollar on Friday (November 13). The pound dropped to around 1.3225 as markets anticipated the Federal Reserve would accelerate its monetary tightening cycle, with the dollar continuing to outperform. As of press time, the dollar index held steady near 103.20, a 19-month high reached on Thursday.

Support for the US dollar: continued inflation, further tightening, and safe-haven demand.

Institutional strategists point out that the US dollar remains strongly supported by persistent inflationary pressures and the prospect of further monetary tightening. They emphasize that the latest strong CPI report, following the suspension of the October meeting, significantly reinforced market expectations of continued policy tightening before the end of the year. Simultaneously, deteriorating global risk appetite provided additional buying power for the dollar through safe-haven demand. October CPI data showed that overall and core inflation rose by 0.4% and 0.3% month-on-month, respectively, both faster than market expectations, directly weakening the narrative of a rapid decline in inflation. The dollar's strength is not driven by a single logic, but rather by the resonance of inflation data, policy expectations, and safe-haven demand. Inflation provides factual basis for the Fed to raise interest rates, policy expectations guide capital flows to dollar assets through interest rate differentials, and safe-haven demand further amplifies buying when risk sentiment weakens. These three factors combined maintain the dollar's relative strength among major currency pairs and exert sustained downward pressure on interest rate-sensitive currencies such as the British pound.

Waller's hawkish turn

Federal Reserve Governor Waller clearly stated before the CPI data release that if the October core CPI reached or exceeded 0.3%, a 50-basis-point rate hike might be necessary at the December meeting. Waller not only remained open to a 50-basis-point hike, but also supported at least a 25-basis-point hike even if inflation data performed better, explicitly classifying current inflation as "too high" and recent data as "poor." His concerns about the breadth of price increases, persistent pressure on producer and energy prices, and the necessity of higher real interest rates further reinforced the core message that "current policy constraints are still insufficient." In contrast, attention to significant stock price volatility was relatively limited. This shift indicates a meaningful tightening of the Fed's perceived stance, directly supporting the dollar and forcing interest rate-sensitive assets to remain defensive, as the market reprices an upward revision of the probability of a December rate hike.

Data Highlights: US PPI released today; UK employment and CPI data to be released next week.

Later that day, investors will focus on the US October Producer Price Index (PPI) data released at 21:30 Beijing time. As a leading indicator of business costs, a stronger-than-expected PPI would further reinforce the narrative that the Fed needs to implement catch-up rate hikes and could push the dollar higher. For the pound, market focus has already shifted to next week's UK labor market data for the three months ending September and the October CPI report. This arrangement implies that the US PPI is a direct input variable for the dollar's movement that day—better-than-expected data will increase downward pressure on the pound against the dollar; while UK employment and inflation data are key anchors for the pound's medium-term direction—if UK data also shows a tight labor market or sticky inflation, it may provide a temporary respite for the pound; if the data falls short of expectations, the pound's weakness against the dollar will likely continue. Therefore, short-term trading will continue to fluctuate around US data, while medium-term pricing will depend on clearer policy guidance from UK domestic data.

in conclusion

The pound fell for the fourth consecutive trading day to around 1.3225 against the dollar, as the dollar continued to strengthen amid expectations that the Federal Reserve might accelerate its tightening policy, with the dollar index holding steady near a 19-month high of 103.20. Analysts pointed out that the dollar was supported by a triple whammy of persistent inflation, the prospect of further tightening, and safe-haven demand. October's overall and core CPI rose 0.4% and 0.3% month-on-month respectively, both exceeding expectations and reinforcing expectations of tightening before the end of the year. Waller stated before the data release that if the core CPI was 0.3% or higher, a 50 basis point rate hike might be necessary in December. The focus of the day was on the US October PPI, while UK employment and CPI data will be released next week—the former determining the dollar's short-term momentum, and the latter determining the pound's downside support. (GBP/USD daily chart, source: FX678) At 14:50 Beijing time, GBP/USD was trading at 1.3227/28.