British Pound fills weekly bearish gap vs USD; upside seems capped amid UK political chaos
The GBP/USD pair climbs back to the 1.3235 region during the Asian session and fails the weekly bearish gap opening amid a modest US Dollar (USD) downtick, though the upside potential seems limited.
Mediators Qatar and Pakistan announced a formal 60-day roadmap aimed at securing a final US-Iran peace deal, which, in turn, keeps a lid on the safe-haven buck and prompts some intraday short-covering around the GBP/USD pair. However, geopolitical developments over the weekend, along with the US Federal Reserve's (Fed) hawkish tilt, could act as a tailwind for the Greenback.
Iran closed the Strait of Hormuz again on Saturday in response to the renewed hostilities by Israel in Lebanon. Moreover, Iranian negotiators walked out of the peace talks in Switzerland in response to US President Donald Trump's threat to strike Iran again. This keeps geopolitical risk premiums in play, which favors the USD bulls and backs the case for the emergence of fresh selling around the GBP/USD pair.
Meanwhile, reports suggest that UK Prime Minister Keir Starmer could announce his resignation as early as Monday, paving the way for the former Manchester Mayor Andy Burnham to replace him. The UK political turbulence, in turn, might continue to undermine the British Pound (GBP) and contribute to keeping a lid on the GBP/USD pair, warranting caution before placing aggressive bullish bets.
Moreover, reduced bets for interest rate hikes by the Bank of England (BoE) suggest that any subsequent move up could be seen as a selling opportunity. Hence, strong follow-through buying is needed to confirm that the GBP/USD pair has bottomed out in the near-term and before positioning for any meaningful recovery from the lowest level since late March, touched on Friday.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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