GBP/USD under selling pressure amid sentiment deterioration mixed US data

• GBP/USD trades at 1.2166, down modestly after reaching a daily high of 1.2211.
• Escalating tensions between Hamas and Israel, with Iran's intensified rhetoric, drive risk aversion, weighing on the Pound.
• Despite higher UK inflation for September ar 6.7%, odds for a BoE rate hike in early November remain subdued.

The Pound Sterling (GBP) trimmed some of its earlier losses versus the US Dollar (USD) but remained on the defensive, registering modest losses of 0.%, as the GBP/USD exchanges hands at 1.2166 after hitting a daily high of 1.2211.

Pound Sterling on the defensive despite UK inflation surpassing estimates

Risk aversion is taking its toll on risk-perceived currencies like the British Pound. Tensions between Hamas and Israel increased after a blast hit a hospital in Gaza, with Palestinians blaming the latter. Consequently, Iran escalated its rhetoric despite US President Joe Biden clarifying that it was not Israel behind the attack.

Despite solid economic data in the US, including positive Retail Sales and Industrial Production figures, the recent rhetoric from US Federal Reserve (Fed) officials has remained dovish, even with inflation running nearly twice the Fed's target. Today's US data presented a mixed picture, with September's Housing Starts rising by 7%, surpassing expectations, while Building Permits declined by -4.4%.

Given these developments, the money market has not priced a 25-basis-point rate hike for November. Instead, the focus appears to be on the January meeting, with the odds of a rate hike standing at 51.65%.

In the meantime, the UK economic docket revealed that inflation in September was higher than expected, hitting 6.7% YoY, with estimates of 6.6%. Despite that, interest rate probabilities for the Bank of England (BoE) remain lower for a rate hike in early November after the BoE kept rates unchanged in September.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD is neutral to a downward bias and would accelerate its downtrend if it drops below the latest swing low of 1.2122, with sellers eyeing a test of October’s swing low of 1.2037. The 1.2000 figure would be up for grabs if the pair clears that level. On the upside, buyers must reclaim the October 13 high of 1.2225 to reclaim 1.2300.