The Pound Sterling (GBP) appreciated by over 0.20% against the US Dollar (USD), trading at 1.3560, as risk appetite improved following a fragile ceasefire between the US and Iran. This development led to lower Oil prices and a weaker USD, while US equities moved higher, supporting the risk-sensitive GBP/USD pair. Buyers are now targeting the 1.3600 level for GBP/USD [1].
The ceasefire, though described as fragile, has held after an exchange of fire between Washington and Tehran. The US Navy, under President Donald Trump’s 'Operation Freedom', destroyed six Iranian boats intended to block commercial shipping in the Strait of Hormuz. In retaliation, Iran attacked UAE Oil facilities, causing a spike in Oil prices [1].
US economic data showed a slowdown in activity for April, with the ISM Services PMI dropping to 53.6 from 54 in March. The employment sub-component improved from 45.2 to 48, while prices paid remained unchanged at 70.7. The US trade deficit widened in March due to large investments in AI, with imports rising 3.6% and exports up 3.1%. Labor market data indicated a decline in job openings, with the JOLTS report showing a decrease from 6.922 million to 6.866 million, below the forecast of 6.83 million [1].
In the UK, Sterling’s gains are also attributed to increased market expectations for a hawkish Bank of England (BoE). Previously, markets anticipated two rate cuts, but now nearly 68 basis points of tightening are priced in by the end of 2026. The UK 30-year Gilt yield rose to 5.787%, its highest since 1998, amid a broad sell-off in Gilts ahead of local elections. The outcome of Thursday’s local elections could add pressure on Prime Minister Keir Starmer and influence Sterling’s direction. No major UK economic data is scheduled for Wednesday, but upcoming speeches by Federal Reserve officials in the US may impact the USD [1].
Technically, GBP/USD maintains a bullish bias, trading above the 50-, 100-, and 200-day simple moving averages clustered around 1.3415. The pair is supported by a previously respected descending trend line and an underlying rising trend-line structure. The FXS Fed Sentiment Index near 132 suggests that external policy expectations have not undermined the broader positive tone for GBP/USD [1].
CONCLUSION
GBP/USD strengthened on improved risk sentiment following a fragile US-Iran ceasefire and rising expectations for Bank of England tightening. Market participants are closely watching upcoming UK local elections and US Federal Reserve speeches for further direction. The technical outlook remains bullish, with buyers eyeing the 1.3600 level.