British Pound loses ground to near 1.3450 as traders await possible US-Iran deal
- GBP/USD declines to around 1.3460 in Thursday’s early European session.
- Negotiations between the US and Iran remain highly uncertain, weighing on riskier assets such as the British Pound.
- US ADP Employment data fell short of expectations in July.
The GBP/USD pair drifts lower to near 1.3460 during the early European trading hours on Thursday. Conflicting rhetoric from the US and Iranian officials about a potential deal fuels market concerns, dragging the British Pound (GBP) lower against the US Dollar (USD). The US Initial Jobless Claims report will be released later on Thursday.
US President Donald Trump said on Wednesday that he had very productive talks with Iran. Meanwhile, US Vice President JD Vance stated that deal negotiations with Iran would “be messy” and take time, saying that “the Iranians are extraordinarily difficult people” with “a fractured system.”
Iranian Deputy Foreign Minister Kazem Gharibabadi said that negotiations between Iran and Oman on reopening the Strait of Hormuz have continued for more than three weeks and produced broad agreement on proposed inbound and outbound shipping routes. However, an Iranian official denied that Tehran is currently holding talks with Washington over the key waterway.
On the other hand, weaker-than-expected US economic data could undermine the Greenback and act as a tailwind for the major pair. Employment in the US private sector increased by 44K in July, compared to a rise of 98K in June, according to the Automatic Data Processing (ADP) on Wednesday. This figure came in below the market consensus of 70K.
The US employment data for July will take center stage later on Friday. Any signs of weakening in the US labor market could prompt traders to push back their bets on Fed rate hikes and undermine the USD.
Data lull keeps focus on UK Q2 GDP release
Strategists at Scotiabank highlight a quiet near-term macro backdrop for the Pound, noting that “the release calendar is limited over the next week or so with no major data scheduled ahead of the preliminary Q2 GDP print on August 13.” This leaves the upcoming growth figures as the key domestic catalyst for GBP/USD, with investors likely to treat the data vacuum as a period of consolidation before reassessing the UK outlook once the GDP numbers are in hand.
Technical Analysis: GBP/USD maintains a constructive near-term outlook
In the daily chart, GBP/USD holds above both the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle SMA, which together reinforce a bullish near-term bias as price works higher within the upper half of the recent range. The Relative Strength Index (14) around 57 suggests constructive momentum without yet venturing into overbought territory, leaving room for further gains while upside remains moderated by the upper Bollinger band.
On the topside, initial resistance is located at the Bollinger Bands’ upper band near 1.3544, where buyers could face profit-taking and a pause in the advance. On the downside, immediate support is clustered around 1.3407/1.3405, where the 20-day Bollinger middle SMA and the 100-day SMA converge as a key demand zone; a deeper pullback would expose the lower Bollinger band support near 1.3271 if that floor gives way.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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