• GBP/USD struggles to gain any meaningful traction for the second straight day on Tuesday.
• Inflation-driven Fed hike bets and geopolitical risks underpin the USD, capping spot prices.
• The downside seems limited as traders await US PCE and Fed Chair Kevin Warsh’s speech.

The GBP/USD pair extends its sideways consolidative price move for the second straight day and trades around the 1.3630 area during the Asian session on Tuesday. The US Dollar (USD) is looking to build on its modest recovery from the lowest level since May 14 and is acting as a headwind for the currency pair. The lack of follow-through selling, however, warrants some caution for bearish traders.

Tamer July US inflation data shifted market expectations toward a policy hold at the upcoming September 15–16 FOMC meeting. Traders, however, are still pricing in an over 75% chance that the US Federal Reserve (Fed) will raise borrowing costs at least once by the end of this year amid inflation risks stemming from volatile crude oil prices. Apart from this, escalating US-Iran tensions underpin the safe-haven Greenback and cap the upside for the GBP/USD pair.

In the latest developments surrounding the Middle East crisis, Treasury Secretary Scott Bessent announced Monday that the US is launching a campaign to isolate Iran from the global economy. Bessent also warned that any country conducting business with Iran risks facing US sanctions. Iran’s Supreme National Security Council secretary, Mohsen Rezaei, had said that the Islamic Republic would halt all oil exports through the Strait of Hormuz if economic war continues.

Traders, however, seem hesitant to place aggressive bullish bets on the USD and opt to wait for more cues about the Fed’s future policy path. Hence, the focus will remain glued to the release of the US Personal Consumption Expenditures (PCE) Price Index on Wednesday and Fed Chair Kevin Warsh’s keynote address at the annual Jackson Hole Symposium on Friday. The outlook, in turn, will influence the USD price dynamics and provide a fresh impetus to the GBP/USD pair.

GBP/USD daily chart

Technical Analysis

The GBP/USD pair maintains a bullish near-term bias above the 200-day Simple Moving Average (SMA). However, a break above the 1.3660-1.3665 supply zone is needed to validate the constructive outlook and back the case for further gains.

On the downside, the 200-day SMA at 1.3431 stands as the primary structural support, and a sustained break below this zone would undermine the broader constructive tone and open the way for a deeper corrective phase.