British Pound strengthens to near 1.3400 as UK political risk fades

• GBP/USD gains ground to around 1.3395 in Thursday’s Asian session.

• Fed officials were split on the direction of interest rates at the June meeting, minutes showed.

• The US launched new airstrikes on Iran.

The GBP/USD pair gathers strength near 1.3395 during the Asian trading hours on Thursday, bolstered by fading domestic political uncertainty. However, hawkish minutes from the Federal Reserve (Fed) and renewed tensions between the US and Iran might support the US Dollar (USD) and cap the upside for the major pair.

Following the resignation of Keir Starmer in late June, UK political risk has eased significantly, lifting the Cable. The formal race to replace outgoing Prime Minister Keir Starmer begins on July 9. Frontrunner Andy Burnham is widely expected to become Prime Minister by July 20.

The release of minutes from the Fed’s June meeting, which was Chairman Kevin Warsh’s first, reflected a divided central bank not sure how to proceed on rates without more information on inflation.

The minutes said that “many participants indicated that the appropriate level of the federal funds rate would be within or slightly below the current target range at the end of this year,” while also saying that “many other participants, however, assessed that the appropriate level of the federal funds rate would be above the current target range.”

Early Thursday, the US launched new airstrikes hitting Iran, sparking retaliatory Iranian fire targeting Bahrain, Kuwait and Qatar in a crossfire that again threatened an interim deal aimed at finding a way to end the war gripping the Persian Gulf.

The US military hit a variety of military sites and port facilities on Wednesday following Iran’s targeting of several merchant vessels off the coast of Oman, sparking Iranian fire then as well. Escalating tensions in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair.