British Pound retreats from 1.34 as Iran tensions boost USD demand

• GBP/USD falls 0.16% to 1.3372 as geopolitical tensions escalate.
• US jobless claims drop to 194K, reinforcing labor market resilience.
• November BoE hike expectations remain firm ahead of UK economic data.

The Pound Sterling retreats against the US Dollar down 0.16% after hitting a high of 1.3419 as tensions in the Middle East rise and US jobs data shows the labor market remains strong. This increases the chances that the Federal Reserve may raise rates, but not in October. The GBP/USD trades at 1.3372.

Sterling retreats on geopolitical risks, resilient US jobs data outweighs BoE hike expectations

An escalation of the US-Iran conflict weighs on most G7 FX currencies, including Sterling, as Iran’s IRGC Navy warned of strikes on US bases if the US encourages the passage of vessels through the Strait of Hormuz. Meanwhile, reports that the US and Israel are preparing another round of strikes after the US midterm elections added to investors' worries that the conflict might prolong further.

Crude prices climbed on the news, with West Texas Intermediate (WTI) rising 0.69% at $98.29 per barrel. Of note, US Treasury yields are falling sharply as traders flee to the safety of US Treasuries in favour of stocks.

US Initial Jobless Claims for the week ending October 24 were better than expected at 194K, below estimates of 200K and the previous reading of 199K, dropping to a near 57-year low. The 4-week average of jobless claims dipped as well to 197.75K, indicating a low-firing environment.

Expectations that the Federal Reserve will raise rates in October are off the table, with odds at 8%. But for December, there’s a near 80% chance, revealed Prime Terminal.

In the UK, recent data has increased the chances that the Bank of England will hike at its November 5 meeting, following the release of higher-than-expected inflation data during the week. Ahead, traders eye the release of Retail Sales and the S&P Global Flash PMIs, which could fortify the case for a rate increase.

Alongside this, traders' eyes are on the UK Finance Minister John Healey, who is expected to announce his first budget on October 28, which major investors expect to pass without unduly rattling markets.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3379, keeping a capped tone as it holds beneath the key simple moving average cluster around 1.3407 and the nearby downward trend-line break at 1.3403. Despite this structural pressure, the Relative Strength Index (14) near 56 suggests improving upside momentum, hinting that any further recovery attempts will first have to challenge this tight resistance band overhead.

On the topside, immediate resistance is aligned at 1.3403 from the descending trend line, with the simple moving average cluster around 1.3407 reinforcing this ceiling; a sustained break above this zone could open the way toward higher trend-line barriers near 1.3624 and 1.3808. On the downside, initial support emerges from the prior downward resistance line now acting as a structural floor around 1.3268, where a break lower would expose a deeper setback within the broader range.

(The technical analysis of this story was written with the help of an AI tool. Know more.)