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GBP weakens below 1.3500 as US launches new wave of strikes against Iran

  • GBP/USD softens to near 1.3470 in Friday’s Asian session.
  • The US launched a new wave of strikes against Iran for a sixth day in a row.
  • Traders still ramp up their bets on BoE rate hikes this year.

The GBP/USD pair trades on a softer note around 1.3470 during the Asian trading hours on Friday. Geopolitical tensions in the Middle East trigger risk-off market sentiment and weigh on the Cable. The preliminary reading of the Michigan Consumer Sentiment Index for July is due later on Friday.

The United States (US) has carried out major strikes on Iran for the sixth day in a row. Officials in southern Iran’s Bandar Abbas reported that civilian infrastructure, including power facilities and a train station, has been hit.

The US Central Command (CENTCOM) said that the attacks were intended to “further degrade Iranian military capabilities” before saying it had boarded a vessel as part of its blockade of the strait. Earlier this week, US President Donald Trump threatened to strike Iran’s bridges and power plants if the country did not return to talks. Rising tensions in the Middle East could boost a safe-haven currency such as the US Dollar (USD) against the British Pound (GBP). 

Data released on Tuesday showed that US Consumer Price Index (CPI) inflation slowed in June, while data from Wednesday showed a decline in the Producer Price ‌Index (PPI). Traders are now pricing ‌in nearly a 55% chance that the Federal Reserve (Fed) will hike rates in September, according to the CME FedWatch Tool.

On the UK front, Bank of England (BoE) Governor Andrew Bailey said on Tuesday that he was concerned about the resumption of hostilities between the US ‌and Iran in recent days, but so far, there has been no big impact on the UK inflation outlook. Money markets are fully pricing in a BoE hike by the November policy meeting, with a second rate hike priced in by April 2027, according to Reuters.

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Trade of The Day – GBP/AUD

Facts: GBPAUD is trading above the 100-period moving average from D1 interval The pair broke above the resistance at 1.9190 The pair invalidated 1:1 structure

Recommendation: Trade: Long position on GBPAUD at market price Target: 1.9735, 2.0000 Stop: 1.9140

Opinion: GBPAUD has been trading in a downward trend since April 2025, but the pair may be experiencing a trend reversal. Looking at the pair at the D1 interval, one can see that the price broke above the upper limit of the 1:1 structure which, according to the Overbalance strategy, may herald a resumption of an upward trend. As long as the price sits above 1.9190, the further upward move is the base case scenario. We recommend going long GBPAUD at market price with two targets: 1.9735 and 2.0000. We also recommend placing a stop loss at 1.9140. Source: xStation5

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GBPUSD up 0.1% after better-than-expected UK GDP data

08:00 AM, United Kingdom, monthly GDP report:

  • UK GDP Estimate YoY Actual 1.3% (Forecast 1.2%, Previous 1.2%)
  • UK GDP Estimate MoM Actual 0.1% (Forecast 0%, Previous -0.1%)
  • UK Manufacturing Production MoM Actual 0.1% (Forecast -0.2%, Previous 0.4%)

The UK economy continues its steady, post-recession expansion, marking its sixth consecutive month of rolling three-month growth. While the broader trend remains highly positive, momentum slowed slightly heading into the summer, influenced by global supply chain disruptions stemming from the geopolitical conflict in Iran. Figure 1: Contributions to three-month GDP growth, UK, May 2025 to May 2026

Source: Gross domestic product (GDP) monthly estimate from the Office for National Statistics Key Performance & Sector Breakdown

  • Overall GDP: Grew 0.7% in the three months to May 2026 (down slightly from 0.8% in April), but managed a modest 0.1% tick-up in the month of May itself.
  • Services (The Growth Engine) : Grew 0.7% in the three months to May. Growth was powered by Information & Communication (up 2.5%) and professional services—specifically scientific R&D (up 5.1% in May), driven by medical sciences.
  • Production & Manufacturing: Rose 0.1% over the three months. Manufacturing was the standout sub-sector (up 1.6%), led by pharmaceuticals. However, this was weighed down by sharp declines in energy and water utilities.
  • Construction: Grew 1.6% over the three months, buoyed by private commercial projects. However, it contracted 0.8% in May, dragged down by a 5% drop in private housing repair and maintenance.

The pound reacted positively to the reading, though it wasn’t able to break out of the current range between 1,3520 and 1,3550. GBPUSD is tradining closely to the 10-hour exponential moving average (EMA10 on an H1 chart; yellow), slowing down after dynamic gains thruought the yesterday’s session.

Source: xStation5

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British Pound weakens below 1.3550 on renewed US strikes on Iran

  • GBP/USD softens to around 1.3530 in Thursday’s early Asian session. 
  • The US military launched another wave of strikes against Iran. 
  • Rising tensions in the Middle East have prompted traders to increase bets on BoE rate hikes this year. 

The GBP/USD pair declines to near 1.3530 during the early Asian session on Thursday. The British Pound (GBP) weakens against the US Dollar (USD) as renewed conflict and shipping disruptions in the Strait of Hormuz have reignited energy-driven inflation risks. Traders brace for the UK monthly Gross Domestic Product (GDP) report and the US Retail Sales data, which are due later on Thursday. 

The US military said it has launched another wave of strikes against Iran in a further effort to keep the Strait of Hormuz open, per the Guardian. Explosions were reported late on Wednesday on Iran’s Qeshm Island, Bandar Abbas, and locations in the Sistan-Baluchestan province.

Iran’s top negotiator, Mohammad Bagher Ghalibaf, said that if Iran did not benefit from its memorandum of understanding with the United States, “We have no reason to adhere to such an understanding.” Rising tensions in the Middle East could boost a safe-haven currency such as the Greenback and act as a headwind for the major pair in the near term. 

Andy Burnham is expected to be officially named UK Prime Minister on July 20, pushing the focus onto his choice of finance minister, given the nation’s shaky public finances.

Traders raise their bets on rate hikes from the Bank of England (BoE) this year, given the expected impact on inflation from higher oil prices.

Money markets are fully pricing in a hike by the November policy meeting, with a second rate hike priced in by April 2027, according to Reuters. Before the US-Iran war, traders had been expecting the BoE to lower interest rates twice this year.

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Euro edges higher against British Pound as oil surge lifts ECB rate expectations

  • EUR/GBP strengthens to around 0.8535 in Wednesday’s early European session.
  • US carries out more strikes on Iran. 
  • Traders boosted wagers on faster BoE and ECB rate hikes after rising oil prices.

The EUR/GBP cross gains momentum to near 0.8535 during the early European trading hours on Wednesday. Traders ramp up bets  on the Bank of England (BoE) and European Central Bank (ECB) rate hikes as oil price surge reignites inflation fears. ECB policymakers Fabio Panetta and Joachim Nagel are set to speak later in the day.

US President Donald Trump’s reimposition of a blockade on Iranian ships transiting the Strait of Hormuz and payment demand for all other cargo have raised oil-driven inflation concerns. On Tuesday, the US Central Command (CENTCOM) said that it launched further attacks on Iran, hitting dozens of military targets near the Strait of Hormuz and Iranian coastal areas.

Iran’s Islamic Revolutionary Guard Corps (IRGC) said on Wednesday that it had targeted what it described as command-and-control, logistics, fuel and military equipment facilities belonging to the US Fifth Fleet in Bahrain, per Reuters.

Traders are now fully pricing a 25 basis points (bps) BOE hike by September, followed by another before year-end. They also expect the ECB to raise rates by a quarter-point in September, with another hike by year-end all but certain, according to Bloomberg.

ECB President Christine Lagarde emphasized that the central bank remains strictly data-dependent. The official policy account explicitly noted that the June hike was neither a guaranteed sequence nor a guaranteed one-off move. On Wednesday, ECB Governing Council member Martin Kocher said that the central bank prepared to implement monetary policy measures whenever necessary. 

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British Pound advances as US Dollar remains subdued following inflation data

  • GBP/USD rises as the US Dollar sustains losses from soft inflation data, raising expectations for a less hawkish Fed.
  • US June CPI inflation slowed to 3.5% year-over-year from May’s 4.2%, comfortably beating the market consensus of 3.8%.
  • The British Pound gains as energy-driven inflation worries push investors to price in aggressive BoE rate hikes.

GBP/USD rises for the second consecutive day, trading around 1.3400 during the Asian hours on Wednesday. The pair appreciates as the US Dollar (USD) holds losses following softer-than-expected US inflation data, fueling hopes that the US Federal Reserve (Fed) might adopt a less hawkish monetary stance.

The US Consumer Price Index (CPI) inflation eased to 3.5% year-over-year in June, dropping from a three-year high of 4.2% in May and coming in well below the market consensus of 3.8%. On a monthly basis, headline CPI actually declined by 0.4% in June, a notable shift from the 0.5% increase recorded in May.

However, the downside of the Greenback could be restrained amid rising safe-haven demand following renewed tensions between the United States (US) and Iran. The renewed Hormuz tensions drive up oil prices, fueling inflation concerns and prolonging higher interest rates by the Federal Reserve (Fed). The CME FedWatch Tool indicates that markets are now pricing in a roughly 50% chance of a Federal Reserve rate hike in September.

The British Pound (GBP) strengthens as Middle East tensions fuel inflation worries from rising energy prices, prompting investors to price in aggressive Bank of England (BoE) rate hikes. Markets now heavily anticipate two increases in 2026, with a September hike fully priced in.

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British Pound strengthens above 1.3350 ahead of US CPI data

  • GBP/USD gathers strength to near 1.3360 in Tuesday’s Asian session. 
  • Renewed US strikes on Iran and fears over Strait of Hormuz shipping might cap the upside for the pair. 
  • BoE’s Pill said interest rates are likely to rise to keep inflation in check. 

The GBP/USD pair trades in positive territory around 1.3360 during the Asian trading hours on Tuesday. However, the potential upside for the major pair might be limited amid fears of an escalating US-Iran conflict. The US June Consumer Price Index (CPI) inflation report will take center stage later on Tuesday. 

US President Donald Trump said on Monday that Washington was reinstating a naval blockade on Tehran and would ensure the Strait of Hormuz remained open for a fee following fresh exchanges of missile and drone strikes, per Reuters. The US military said that US forces completed new strikes on Iranian military targets, adding that more than 50,000 US service members are currently deployed across the Middle East. 

Meanwhile, the Iranian Islamic Revolutionary Guards Corps (IRGC) said on Tuesday that cooperation with the ‘aggressor enemy’ in the Strait of Hormuz will delay the reopening of the waterway and create a global energy crisis. Concerns over escalating tensions between the US and Iran could boost a safe-haven currency such as the US Dollar (USD) and cap the upside for the GBP/USD pair. 

Traders ramped up bets that the Bank of England (BoE) will be forced to raise interest rates this year to keep inflation under control. BoE Chief Economist Huw Pill said that interest rates are likely to rise this year to prevent inflation from becoming entrenched. 

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Pound Slips as Middle East Tensions Weigh on Markets

The pound fell back below $1.34, retreating from three-week highs, as investors reacted to rising Middle East tensions. Oil prices surged following another wave of US strikes on Iran, with both sides clashing over the status of the Strait of Hormuz. The US Central Command confirmed strikes on dozens of targets to curb Iran’s ability to threaten shipping in the region, while Iran declared the strait would remain closed “until further notice.” The resulting uncertainty amplified inflation concerns, prompting investors to increase bets on further Bank of England interest rate hikes. Markets now anticipate at least one rate increase later this year, with a possibility of a second. Politically, Andy Burnham is set to become the new Labour party leader when the leadership contest ends on Friday and is expected to be officially appointed as prime minister next Monday. Sterling’s resilience amid recent political turmoil suggests much of the negative news has already been factored in.