The British Pound (GBP) is consolidating near a three-week low against the US Dollar (USD), trading below the 1.3500 psychological mark during the Asian session on Thursday. This follows a recent dip to its lowest level in three weeks, with the pair stabilizing after the USD's corrective fall the previous day. The US Dollar has found support from increased expectations of a Federal Reserve (Fed) rate hike this month, spurred by hawkish remarks from Fed Chair Kevin Warsh last Friday. Additionally, inflation risks linked to higher energy prices are reinforcing the case for Fed policy tightening, which is acting as a headwind for the GBP/USD pair [1].
Geopolitical tensions have also contributed to the USD's strength, as fresh American strikes on Iranian targets and retaliatory drone and missile attacks by Tehran across the Gulf region have heightened uncertainty. Ongoing clashes over the Strait of Hormuz are maintaining a geopolitical risk premium, further underpinning the safe-haven appeal of the Greenback. However, declining US bond yields are preventing USD bulls from making aggressive bets, which is helping to limit further losses for the GBP/USD pair [1].
Market participants are now awaiting the release of the US ISM Services PMI for additional direction, with the primary focus on the upcoming US Nonfarm Payrolls (NFP) report on Friday. Developments in the Middle East crisis are expected to continue driving volatility in financial markets, influencing USD price dynamics and creating short-term trading opportunities around the GBP/USD pair [1].
From a technical perspective, the GBP/USD pair is trading around the 200-period Simple Moving Average (SMA) on the 4-hour chart and above the 50.0% Fibonacci retracement of the July-August upside. A break below this level could open the way to deeper Fibonacci support at 1.3425 and 1.3357, while resistance is seen at the 38.2% retracement at 1.3521, the 23.6% retracement at 1.3580, and a more distant barrier at the cycle high near 1.3676 [1].
CONCLUSION
The GBP/USD pair remains under pressure due to Fed rate hike expectations and heightened geopolitical risks, though falling US bond yields are providing some support. Upcoming US economic data and further developments in the Middle East are likely to drive near-term volatility and influence trading opportunities in the pair.