The GBP/USD pair fills a major part of its weekly bearish gap opening on Monday and is now looking to extend the momentum further beyond the 1.3600 mark.
Spot prices, however, remain below the 1.3635 horizontal resistance and the highest level since February 16, touched earlier this month, warranting caution for bullish traders amid a modest US Dollar (USD) strength
Against the backdrop of renewed hostilities in the Strait of Hormuz, disagreements over Tehran’s nuclear program dampen bets for a US-Iran peace deal. US President Donald Trump and Iran both rejected each other’s peace proposals for ending the war and the gradual reopening of the Strait of Hormuz. This keeps geopolitical risks in play, which, along with hawkish US Federal Reserve (Fed) expectations, turn out to be key factors underpinning the safe-haven USD.
The US-Iran standoff triggers a fresh leg up in Crude Oil prices, fueling inflationary concerns and keeping hopes alive for at least one 25-basis-point (bps) rate hike by the US central bank in 2026. In fact, the CME Group’s FedWatch Tool indicates a nearly 20% chance that the Fed will raise borrowing costs by the end of this year. That said, easing UK political uncertainty underpins the British Pound (GBP) and might continue to act as a tailwind for the GBP/USD pair.