The British Pound (GBP) is consolidating around the 1.3500 level against the US Dollar (USD), trading nearly unchanged during the early European session on Tuesday. This comes after the pair reached its highest level since July 16 in the previous session, as traders exercise caution ahead of key macroeconomic releases from both the US and the UK later this week [1].
Market participants are closely watching the upcoming US Consumer Price Index (CPI) report scheduled for Wednesday, followed by the preliminary UK Q2 Gross Domestic Product (GDP) figures on Thursday and the US Producer Price Index (PPI). The consensus for the UK GDP is a 0.4% quarter-on-quarter increase, compared to the previous reading of 0.6% [1]. These data releases are expected to provide fresh impetus for the GBP/USD pair.
Geopolitical tensions are also influencing market sentiment. The ongoing US-Iran standoff, with Iran ruling out negotiations with US President Donald Trump until his term ends on January 20, 2029, has dampened hopes for a quick reopening of the Strait of Hormuz. Additionally, shipping disruptions in the Bab el-Mandeb Strait due to the Iran-backed Houthis' naval blockade against Saudi Arabia have pushed crude oil prices to a one-and-a-half-week high [1].
Meanwhile, expectations that the US Federal Reserve may adopt a more hawkish stance in response to inflation risks—partly driven by volatile oil prices—are supporting the US Dollar and capping gains in GBP/USD. Traders are currently pricing in a greater chance that the Fed will raise borrowing costs at least once by the end of the year, which is also reflected in elevated US Treasury yields [1]. Technical analysis indicates immediate support for GBP/USD at the 100-period Simple Moving Average (SMA) at 1.3408, with resistance at the July swing high around 1.3555-1.3560 [1].
CONCLUSION
The GBP/USD pair remains range-bound near 1.3500 as traders await key US and UK economic data releases. Geopolitical tensions and expectations of a more hawkish US Federal Reserve are supporting the US Dollar, limiting further gains for the Pound. The upcoming CPI and GDP figures are likely to determine the next directional move for the currency pair.