GBP/USD sinks below 1.32 as Powell's "hawkish cut" strengthens Dollar

• GBP/USD falls for third straight day, down 0.25% after Fed signals December cut remains uncertain.
• Powell warns inflation risks stay tilted higher as Fed ends balance sheet runoff on December 1.
• UK fiscal uncertainty pressures Sterling amid reports Reeves may adjust windfall and income taxes.

GBP/USD extended its losses for the third straight day, dives over 0.25% as traders push the exchange rate below the 1.3200 handle, following the Fed "hawkish" rate cut as the Chairman Jerome Powell poured cold water of a reduction in the December's meeting. At the time of writing, GBP/USD trades at 1.3160 after hitting a daily high of 1.3218.

Pound pressured ahead of next week's BoE decision and UK fiscal plans

On Wednesday, the Fed cut rates to 3.75%-4% amid the lack of economic data due to the US government shutdown, entering its thirtieth day. The decision was not unanimous, with Fed Governor Stephen Miran opting for a 50-bps cut, while the Kansas City Fed President Jeffrey Schmid voted to hold rates unchanged.

Also, the US central bank announced the end of Quantitative Easing (QE) on December 1. In the press conference, Powell said that the balance of risks are tilted to the upside on inflation and to the downside on the jobs market and added that there were constructive discussions at the meeting, regarding the December's decision.

Powell made clear that a cut in December, is far from a sure thing, as he said, "a further reduction in the policy rate at the December meeting is not a foregone conclusion -- far from it."

Meanwhile, the Pound Sterling remains pressured as investors' attention shifts to next week's Banf of England (BoE) monetary policy decision, and the UK budget. The Financial Times revealed that UK Chancellor Reeves is looking at an early scraping of windfall tax on the UK oil and gas sector. The Telegraph said that Reeves is considering a 2 percent rise in income tax.

The light US schedule will feature Dallas Fed President Lorie Logan late today and on Friday. Atlanta's Fed Raphael Bostic and Cleveland's Beth Hammack will cross the wires on Friday at a research conference.

GBP/USD Price Forecast: Technical outlook

The technical picture shows the GBP/USD is bearishly biased after clearing the 200-day SMA at 1.3242, which opened the door to drop below 1.3200. A daily close below the 200-day SMA would cement the trend shift, exposing key support levels like the 1.3000 figure, followed by the April 8 low of 1.2708.

Conversely, if buyers reclaim 1.3200, the GBP/USD could consolidate within the 1.32/1.33 range in the near term.