British Pound holds near Feb. 11 highs vs weak USD as bulls await breakout above 1.3660

The GBP/USD pair trades with a positive bias around mid-1.3600s at the start of a new week and remains well within striking distance of its highest level since February 11, touched on Friday. Moreover, the fundamental backdrop favors bullish traders and backs the case for an extension of a nearly one-month-old uptrend.

The US Dollar (USD) continues its struggle to register any meaningful recovery and languishes near its lowest level in more than three months, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. Traders have been scaling back their bets for an immediate interest rate hike by the US Federal Reserve (Fed) amid signs of cooling price pressures. Adding to this, the US Treasury announced last Wednesday that it would at least double buyback operations for long-dated government debt starting in September, which triggered a pullback in US bond yields. This keeps USD bulls on the defensive and validates the near-term positive outlook for the currency pair.

However, a further escalation of tensions between the US and Iran could help limit losses for the safe-haven buck. US Treasury Secretary Scott Bessent is due to announce what he has called the toughest sanctions in history on Iran at a press conference on Monday. Iran's Supreme National Security Council secretary, Mohsen Rezaei, responded by warning that the Islamic Republic would halt all oil exports through the Strait of Hormuz and anywhere else in the Persian Gulf if economic war continues. Rezaei added that any country participating in the US sanctions would be treated as an act of war against Iran. This keeps geopolitical risk premium in play and should support the USD.

Furthermore, inflation risks stemming from volatile oil prices underpin prospects for at least one Fed rate hike move by the end of this year. This might hold back traders from placing fresh bearish bets on the Greenback and cap the upside for the GBP/USD pair. The market focus now shifts to this week's release of the US Personal Consumption Expenditures (PCE) Price Index on Wednesday, followed by Fed Chair Kevin Warsh's appearance at the Jackson Hole Symposium. Investors will look for more cues about the Fed's policy path, which will play a key role in influencing near-term USD price dynamics and provide some meaningful impetus to the currency pair.

GBP/USD daily chart

Technical Analysis

The GBP/USD pair now awaits a breakout and acceptance above the 1.3660 supply zone before the next leg up. On the flip side, any corrective pullback towards the 1.3600 mark is more likely to be bought into and remain limited near the 1.3570 support.