Cooling US inflation data weakens the USD, lifting GBP/USD, though Middle East tensions limit further gains.
The GBP/USD pair recovered from a two-day slide to a weekly low during Friday’s Asian session, supported by softer US inflation data. The pair struggled to sustain gains above the 1.3500 mark, reflecting caution among traders.
US Producer Price Index (PPI) data released Thursday showed weaker-than-expected inflation, while Wednesday’s Consumer Price Index (CPI) met expectations, reinforcing expectations the Federal Reserve may hold rates steady. This weighed on the USD, providing a lift to the pound.
However, escalating geopolitical tensions in the Middle East capped further upside. US Treasury Secretary Scott Bessent warned of unprecedented measures against Iran, while Iranian officials signaled a strategy to deter future US military action. The standoff over the Strait of Hormuz kept risk sentiment in check, supporting the safe-haven USD.