British Pound holds firm as Hormuz shock lifts Oil, Dollar
- US-Iran attacks revive Hormuz fears and lift crude prices.
- FOMC minutes could clarify Warsh’s first policy debate.
- Burnham’s chancellor pick keeps UK political uncertainty elevated.
The Pound Sterling posted modest gains during the North American session amid growing tensions in the Middle East and US President Donald Trump's comments that the deal with Iran was “over” after both countries exchanged attacks over the last couple of days. At the time of writing, the GBP/USD trades at 1.3371, up 0.09%.
GBP/USD steadies as geopolitical risk offsets Dollar strength
During the last couple of days, Tehran and Washington exchanged blows after the former hit two vessels sailing through the Strait of Hormuz, triggering a response from the US. The US CENTCOM revealed that it attacked 80 targets during the last two days. In addition to the attacks, the US reimposed sanctions on Iran’s Oil, while Trump threatened to resume the blockade in Hormuz.
Energy prices jumped, with the US crude Oil benchmark, Western Texas Intermediate (WTI), rising nearly 5% to $75.60.
The US economic docket will feature the release of the June FOMC minutes, the first under the new Chair, Kevin Warsh. Aside from this, geopolitical developments and improvements in relations between the US and Iran might be catalysts for the trading session.
In the meantime, the US Dollar Index (DXY), which measures the performance of the American currency against the other six, is up 0.10% to 101.19, bolstered by the rise of WTI.
Money markets remain confident that the US Federal Reserve might increase borrowing costs at least once in 2026, with odds at 94%. For the July meeting, traders had priced in a 65% chance of holding rates, according to Prime Terminal data.
On Thursday, the US economic schedule will feature the release of Initial Jobless Claims for the week ending July 4.
In the UK, uncertainty over the pick as finance minister for the upcoming Prime Minister, Andy Burnham, keeps investor tensions high. According to Polymarkets, there’s a 51% chance that the left-leaning former energy minister Ed Miliband will take on the role.
In the UK, Bank of England (BoE) Deputy Governor Sarah Breeden will cross the wires, amid a scarce economic docket.
GBP/USD Price Forecast: Technical outlook
In the daily chart, GBP/USD trades at 1.3365, keeping a mildly bearish near-term tone as it holds under the cluster of simple moving averages around 1.3401 and remains capped well below the descending resistance trend line coming in near 1.3509. The Relative Strength Index (14) at 53.8 drifts just above neutral, hinting at a modest recovery in momentum, yet this improvement is not sufficient to offset the overhead technical barriers that continue to weigh on the pair.
On the topside, initial resistance is located at the grouped 50-, 100- and 200-day simple moving averages around 1.3401, with a subsequent hurdle at the downward-sloping trend line break level near 1.3509. On the downside, the structural floor is defined by the upward support trend line originating from 1.3159, and a clean break toward that zone would likely reinforce the prevailing bearish bias despite the currently stabilizing momentum backdrop.
(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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