The British Pound (GBP) maintained a positive bias against the US Dollar (USD), trading just above the mid-1.3400s during the Asian session on Wednesday, after stalling a retracement from levels above the 1.3500 psychological mark [1]. The currency pair attracted dip-buyers, but its upside potential appears limited due to persistent geopolitical uncertainties, particularly renewed US attacks on Iran, which have dampened hopes for an imminent resolution to the ongoing Middle East conflict. Iran’s Foreign Ministry condemned these attacks as a violation of a ceasefire, and the Islamic Revolutionary Guard Corps (IRGC) threatened retaliation, keeping the geopolitical risk premium elevated [1].
Despite these tensions, investors remain cautiously optimistic about tentative progress in US-Iran diplomatic talks, which has helped ease fears of severe energy supply disruptions and supported a positive risk tone in the market. Additionally, a modest decline in crude oil prices has alleviated inflationary concerns, capping gains for the USD and lending some support to the GBP/USD pair [1]. However, hawkish expectations for the US Federal Reserve (Fed) continue to act as a tailwind for the safe-haven USD, limiting further gains for the Pound [1].
On the domestic front, the UK Consumer Price Inflation (CPI) unexpectedly slowed to 2.8% year-on-year in April, down from 3.3% in the previous month. This development prompted traders to push back expectations for the timing of the next Bank of England (BoE) interest rate hike [1]. Political instability in the UK, including growing calls for Prime Minister Keir Starmer to step down, has added to market caution and contributed to a lack of aggressive bullish bets on the Pound [1].
Technical analysis indicates immediate resistance for GBP/USD near the 1.3500 psychological level, with support just above the mid-1.3400s. In the absence of significant macroeconomic data releases from either the UK or the US, the pair is likely to remain range-bound in the near term [1].
CONCLUSION
The British Pound is holding above 1.3450 against the US Dollar, supported by a positive risk tone and easing inflation concerns, but faces headwinds from geopolitical tensions and domestic political instability. With traders delaying expectations for a Bank of England rate hike and no major data releases on the horizon, GBP/USD is expected to remain range-bound in the near term.