British Pound falls as Iran deal doubts, weak UK PMI bite

• WTI rebound lifts Dollar as Iran talks hit fresh roadblocks.
• US PMIs strengthen, reinforcing Fed’s cautious policy stance.
• UK Composite PMI contraction exposes deeper growth risks.

The GBP/USD fell by some 0.20% on Thursday amid concerns that the US and Iran couldn’t reach a deal, while strong US economic data was a headwind for Sterling, which dipped amid weakening UK business activity. At the time of writing, the pair trades at 1.3406 after peaking near 1.3454.

GBP/USD slips as stronger US data offsets weekly gains

Cable enjoyed a volatile ride during the week, posting gains of 0.65% weekly, sponsored by Andy Burnham —the challenger to succeed the UK PM Keir Starmer— who said that he wouldn’t change Chancellor Reeves' fiscal rules if he becomes the new PM. However, geopolitics is back on the front page, with Iran’s supreme leader issuing orders that near-weapons-grade uranium should not be sent abroad, toughening Tehran’s stance, according to two senior Iranian sources.

Oil prices reacted accordingly, with WTI rising over 2.60% at $101.66 per barrel. The Greenback—positively correlated with WTI—followed suit, as the US Dollar Index (DXY) is up 0.31% to 99.43.

Back to macroeconomics, the Fed’s last meeting minutes showed a division amongst the board, with most of its members opting to hold rates unchanged or eyeing a rate hike if the energy supply shock spurred by the Iran war prolongs further.

Earlier, US Initial Jobless Claims for the week ending May 16, dipped from 212K in the previous reading to 209K, beneath estimates of 210K. S&P Global revealed that US manufacturing activity strengthened in May, with the index reaching its highest level in four years. The S&P Global Manufacturing PMI rose from 54.5 in April to 55.3, driven by businesses boosting inventories to prevent potential shortages and rising prices.

In the UK, business activity weakened as the S&P Global Composite PMI for May contracted to 48.5 from 52.6, beneath the estimate of 51.6, an indication that economic activity could shrink further, weighed by the Middle East conflict.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The UK economy is facing a perfect storm as rising political uncertainty adds to the growing impact from the war in the Middle East.”

Ahead this week, the UK economic docket will feature Retail Sales data on Friday. Across the pond, traders will eye the University of Michigan Consumer Sentiment and the swearing-in of the new Fed Chair, Kevin Warsh.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3407, holding below the clustered 50-, 100- and 200-day simple moving averages (SMAs) around 1.3431, which keeps the broader tone capped despite the pair stabilizing off recent lows. The price sits above the rising support line drawn from 1.3159, suggesting the broader uptrend is still technically intact, but a soft Relative Strength Index (RSI) near 45 hints at fading bullish momentum while spot remains trapped between that trend support and the overhanging SMA barrier.

On the topside, initial resistance is located at the triple SMA cluster around 1.3431, with a break there needed to ease immediate downside pressure and open the way toward the downtrend reference area near 1.3627. On the downside, first structural support is seen around the former break region of the rising trend line near 1.3318, ahead of the 1.3159 origin of that line, where failure would likely signal a deeper bearish extension.

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