British Pound consolidates around mid-1.3300s vs USD; upside potential seems limited
The GBP/USD pair struggles to capitalize on the previous day's modest bounce from the 1.3300 neighborhood, or over a three-week low, and seesaws between tepid gains/minor losses during the Asian session on Tuesday. Spot prices currently trade around mid-1.3300s amid a softer US Dollar (USD), though the fundamental backdrop warrants some caution before positioning for any meaningful appreciation.
Iran’s army announced on Monday that its attack on Israel was over, though it warned that further strikes on Lebanon would open the door for retaliation. Israeli Prime Minister Benjamin Netanyahu acknowledged the halt in fighting with Iran, but he vowed to respond with force to future attacks. This, in turn, drags the safe-haven USD further away from its highest level since late March, touched the previous day, and offers some support to the GBP/USD pair.
Meanwhile, the US and Iran remain at odds over key issues, including Tehran's nuclear program and the Strait of Hormuz. This keeps a lid on the market optimism, which, along with hawkish US expectations, should help limit deeper USD losses. In fact, traders are currently pricing in over a 70% chance that the US central bank will hike rates by the end of this year amid inflationary concerns, which favors the USD bulls and caps the GBP/USD pair.
Meanwhile, UK Prime Minister Keir Starmer's authority has been severely shaken following the resignations of junior ministers, fueling political uncertainty. This might hold back traders from placing aggressive bullish bets around the British Pound (GBP). Hence, it will be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has formed a near-term bottom, as the focus remains on the release of US inflation figures and the monthly UK GDP.
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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