The British Pound (GBP) extended its decline against the US Dollar (USD) for a second consecutive day, with GBP/USD trading around 1.3510 during Asian hours on Wednesday [1][2]. This move was driven by a strengthening US Dollar, supported by rising US Treasury yields and surging oil prices, which have reignited concerns over persistent inflation and the potential for further interest rate hikes in the United States [1]. The US 10-year Treasury yield climbed to 4.80%, its highest level since early 2025, amid a global bond selloff [1]. Crude oil prices also jumped as hostilities between the US and Iran escalated, raising risks of energy flow disruptions from the Middle East [1][2].
Geopolitical tensions intensified after the US and Iran exchanged attacks, with US President Donald Trump stating that American strikes were in retaliation for Iranian actions in a critical waterway and warning of further responses if Tehran retaliated [2]. This backdrop has provided additional support to the safe-haven US Dollar at the expense of the Pound [2].
On the monetary policy front, Federal Reserve Vice Chair Barr maintained a hawkish tone, emphasizing that inflation remains too high and keeping the option for further rate hikes open if inflation fails to moderate [1]. The FXS Fed Sentiment Index slipped by 0.42 points to 128.86 but remained well above the neutral 100 mark, indicating continued hawkishness from the Fed [1]. In contrast, Bank of England Governor Andrew Bailey downplayed the inflation threat in the UK, noting the absence of significant second-round inflation effects and a softening labor market [2]. Markets are fully pricing in a 25 basis point rate hike this year and another by spring, according to Bloomberg [2].
Analysts at UOB Group reiterated their cautious stance on GBP, highlighting downside risks and identifying 1.3480 as a key level to watch, with 1.3600 as strong resistance [2]. Technical analysis shows GBP/USD holding above the 100-day simple moving average at 1.3443, with the Relative Strength Index near 48, suggesting neutral momentum and a modestly bullish near-term bias, though lacking a clear upward drive [2]. Economic data from the US presented a mixed picture, with July JOLTS job openings rising to 7.27 million (below expectations) and the ISM Manufacturing PMI easing to 54.6 in August from 55.6, still indicating expansion [1].
CONCLUSION
The British Pound remains under pressure as the US Dollar benefits from rising yields, higher oil prices, and escalating geopolitical tensions. While the Federal Reserve maintains a hawkish stance, the Bank of England appears more cautious, contributing to the GBP's vulnerability. Technical and fundamental signals suggest downside risks persist for GBP/USD in the near term.