British Pound buckles as Hormuz attacks spark US Dollar rush

• US-Iran strikes lift oil prices and revive Dollar demand.
• ADP and JOLTS data point to resilient labor conditions.
• UK services contraction adds pressure despite BoE hike pricing.

The Pound Sterling drops by 0.28% during the North American session as the US and Iran exchange attacks, while data in the US revealed that the labour market remains solid and that business activity expanded but is slowing. At the time of writing, the GBP/USD trades at 1.3426 after reaching a daily high of 1.3471.

GBP/USD falls as US data strength compounds geopolitical pressure

Overnight, the US military carried out attacks near the Strait of Hormuz, while Tehran attacked US Gulf allies, Kuwait, the UAE and Saudi Arabia. Iran reported that the US attacked Qeshm Island and, as retaliation, the IRGC launched strikes on US bases, warning that additional attacks would be met with a seismic, crushing and decisive response.

In the meantime, talks between Washington and Tehran seem far from resuming after Iran’s Fars news agency reported that communication had stopped for a few days, even though US President Trump denied it.

Oil prices and the US Dollar surged on the US-Iran exchange, with WTI soaring over 2%, while the Greenback is up 0.19% on the US Dollar Index (DXY). The DXY, which measures the performance of the buck’s value against a basket of six currencies, sits near three-day highs at around 99.50.

US data revealed that the jobs market is solid, with the ADP National Employment for May, rising by 122K, exceeding forecasts of 117K. On Tuesday, the US JOLTS job openings report showed that vacancies rose in April, and the combined reports could open the door to a solid Nonfarm Payrolls report on Friday, in which the US economy is expected to add 85K people to the workforce.

Other data showed that the ISM Services PMI expanded from 53.6 to 54.5, as businesses placed orders ahead of higher prices. A sub-component of the ISM, the Prices Paid, rose from 70.7 to 71.3, indicating the energy shock was broadening to the services sector.

Across the pond, the UK S&P Global Services PMI contracted, from a 52.7 reading in April to 49.3 in May, above forecasts of 47.9.

Recently, money markets had paired their bets that the Bank of England (BoE) will raise rates this year, with traders pricing in a quarter of a percentage point rate hike until the September meeting.

Given the backdrop, an extension of the conflict could push the GBP/USD lower amid growing speculation of higher Oil prices and a stronger US Dollar. Although this could prompt the BoE to increase borrowing costs, economic activity has been slowing, which opens the door for a stagflationary scenario.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3434, keeping a mild bearish bias as it holds below the cluster of simple moving averages (SMA) around 1.3450 while still staying above the last meaningful uptrend support near 1.3358. The Relative Strength Index (14) at roughly 47 drifts below the midline, hinting that upside momentum is subdued and that any recovery attempts may struggle while the pair remains capped beneath the downward resistance trend-line breakout area at about 1.3598.

On the topside, immediate resistance is seen at the SMA cluster around 1.3450, with a stronger barrier at the former downtrend break level near 1.3598, which would need to give way to ease the current capped tone. On the downside, initial support is aligned with the prior upward trend-line break around 1.3358, and a clear drop through this floor would reinforce the bearish bias by exposing lower levels in the broader range.

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