British Pound remains depressed below 1.3400 as escalating US-Iran tensions underpin USD
The GBP/USD pair finds some support near 1.3370 after a modest gap-down opening on Monday, though it lacks bullish conviction and remains below 1.3400. Nevertheless, spot prices, for now, seem to have stalled the pullback from a nearly four-week high, around the 1.3450 area, touched on Friday amid mixed fundamental cues.
Former Greater Manchester mayor Andy Burnham secured the support of the vast majority of Labour MPs to replace Keir Starmer and become Britain's next prime minister, calming concerns about political instability. This, along with bets for at least one 25-basis-point (bps) interest rate hike from the Bank of England by the end of 2026, lends some support to the British Pound (GBP). However, escalating US-Iran tensions benefit the safe-haven US Dollar (USD) and might keep a lid on any further upside for the GBP/USD pair.
The US military launched another round of strikes at Iran after Iran’s Islamic Revolutionary Guard Corps (IRGC) announced the closure of the Strait of Hormuz and fired at another commercial vessel in the waterway. In response, Tehran fired a wave of attacks targeting US military bases in the region over the weekend, underpinning the safe-haven buck. Furthermore, rising Oil prices revive inflationary concerns and bolster US Federal Reserve (Fed) rate-hike expectations, further benefiting the USD and capping the upside for the GBP/USD pair.
Moving ahead, there isn't any relevant market-moving economic data due for release on Monday, either from the UK or the US, leaving spot prices at the mercy of the USD price dynamics. Later during the North American session, traders will take cues from speeches by influential FOMC members. The market focus, however, remains clued to the latest US inflation figures, which will drive expectations about the Fed's policy path. This, in turn, will provide some meaningful impetus to the Greenback and the GBP/USD pair during the latter half of the week.
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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