Pound Sterling Recovers After Hitting Low Against USD
The GBP/USD pair recorded a modest recovery after hitting a four-month low in the 1.3160-1.3155 area during the Asian session on Tuesday. This recovery ended a five-day losing streak. Spot prices managed to re-surface above the 1.3200 level in the last hour, although the potential for further gains appears limited due to escalating tensions in the Middle East.
US President Donald Trump stated on Monday that significant progress had been made in talks to end US military operations in Iran. Trump also added that a more "rational" deal with the Iranian regime was still possible. However, Trump warned that the US could launch a major attack on Iran's key energy infrastructure if a deal was not reached soon, and if the Strait of Hormuz was not immediately opened to commercial traffic.
In response, Iran showed reluctance to negotiate with the US, underscoring the fragile diplomatic progress and dampening hopes for a de-escalation of tensions in the Middle East. These tensions supported high energy prices, which in turn fueled inflation concerns and expectations of hawkish policy from the US Federal Reserve. Traders are now pricing in a more than 50% chance of a Fed interest rate hike in 2026, pushing the USD to its highest level this year and putting pressure on GBP/USD.
Meanwhile, the UK economy is highly vulnerable to energy price shocks related to the Iran war. Furthermore, hawkish signals from the Bank of England (BoE) regarding a possible interest rate hike next April due to inflation concerns increase downside risks to the economy. This may discourage traders from placing aggressive bullish bets on the Pound (GBP) and will limit GBP/USD gains, thus urging caution in positioning for a more meaningful recovery.
Going forward, it would be prudent to wait for stronger buying confirmation before confirming that spot prices have reached a short-term bottom, while traders will await the final UK GDP data for a trigger. In the coming session, the US JOLTS Job Openings report and the Conference Board's Consumer Confidence Index will influence the USD and generate short-term opportunities around the GBP/USD pair. The main focus, however, remains on ongoing geopolitical developments. (asd)
Source: Newsmaker.id
