Geopolitical tensions and upcoming UK economic data cap gains in the pound after a 100-pip rally against the dollar.
The GBP/USD pair slipped from near 1.3400 in Asian trading Friday, failing to extend a 100-pip intraday rally. Investors remain cautious ahead of UK macroeconomic releases and developments in the Middle East crisis, which have clouded the outlook for risk assets.
Optimism over a potential US-Iran deal lifted global risk sentiment Thursday, pressuring the safe-haven dollar and fueling short-covering in the pound. However, Iran’s Foreign Ministry denied finalizing an agreement, citing unresolved issues like the Strait of Hormuz and frozen funds. A recent tanker blockade by Iranian forces further underscored lingering tensions.
Stronger-than-expected US Producer Price Index data for May reinforced expectations of a Federal Reserve rate hike later this year, providing additional support to the dollar. The combination of geopolitical uncertainty and hawkish Fed bets limited the pound’s upside.