Escalating geopolitical risks in the Middle East bolster the safe-haven USD, capping gains in the British Pound despite BoE rate hike bets.
The GBP/USD pair trades below 1.3400, struggling to regain momentum after a gap-down open near 1.3370. The British Pound finds limited support from expectations of a Bank of England rate hike by late 2026 and reduced political uncertainty following Labour leadership developments.
Recent price action follows a pullback from a nearly four-week high of 1.3450, reached last week amid mixed economic signals. However, escalating US-Iran tensions, including military strikes and threats to close the Strait of Hormuz, have strengthened demand for the safe-haven US Dollar.
Rising oil prices and revived inflation concerns also fuel expectations of further Federal Reserve tightening, further weighing on the GBP/USD pair. No major economic data releases are scheduled for Monday, leaving markets focused on geopolitical developments.