|

British Pound falls as Iran deal doubts and weak UK PMI weigh

  • WTI rebound lifts the US 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 pair falls by about 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 the Pound Sterling (GBP), which dips amid weakening UK business activity. At the time of writing, the pair trades at 1.3406 after peaking near 1.3455.

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 Rachel 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 West Texas Intermediate (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 Federal Reserve's (Fed) 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 on Thursday, 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, below the estimate of 51.7, 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

Chart Analysis GBP/USD

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.)

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Euro.

USDEURGBPJPYCADAUDNZDCHF
USD0.27%-0.62%0.24%0.26%0.19%-0.24%0.31%
EUR-0.27%-0.91%0.04%-0.03%-0.10%-0.45%0.00%
GBP0.62%0.91%0.90%0.89%0.82%0.46%0.90%
JPY-0.24%-0.04%-0.90%-0.04%-0.11%-0.52%0.03%
CAD-0.26%0.03%-0.89%0.04%-0.08%-0.49%0.03%
AUD-0.19%0.10%-0.82%0.11%0.08%-0.35%0.22%
NZD0.24%0.45%-0.46%0.52%0.49%0.35%0.43%
CHF-0.31%-0.01%-0.90%-0.03%-0.03%-0.22%-0.43%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

AUD/USD: Next upside target comes at 0.7000

AUD/USD has advanced further, clinching its third consecutive day of gains and trading at shouting distance from the key 0.7000 threshold on Tuesday. The widespread improved sentiment in the risk complex helped the Aussie maintain its upside momentum, while the fresh selling impulse in the Greenback also contributed to the move.

USD/JPY rises back above 158.00 despite hawkish BoJ outlook

USD/JPY rises back above 158.00 in the early European morning on Tuesday. The pair strengthens as the Japanese Yen fails to find any inspiration from hawkish BoJ expectations and looming intervention risks. Meanwhile, geopolitical uncertainty and elevated US bond yields keep the US Dollar near its YTD high despite receding October Fed hike bets. This, in turn, helps the pair stay supported.

Gold stays firm; looks at $4,200

Gold builds on Monday’s marginal bounce, although it struggles to reclaim the key $4,200 mark per troy ounce so far on Tuesday. The yellow metal’s advance comes on the back of the fresh downside momentum in the US Dollar in tandem with retreating US Treasury yields across the curve.

ZEC expands institutional momentum as Winklevoss files for Zcash ETF
Winklevoss Asset Services, co-owned by crypto exchange Gemini founders Cameron and Tyler Winklevoss, filed a Form S-1 registration statement with the US Securities and Exchange Commission (SEC) on Tuesday for the Winklevoss Zcash (ZEC) ETF. The filing proposes a fund that would hold ZEC and seek to track its price.
The market is pricing a BoJ pause. Here's why Ueda's 'keep raising rates' could force a sharp Yen repricing

Traders betting on the Bank of Japan's rate through overnight-rate futures give a hike on October 30 about a one-in-four chance, so the market is pricing a pause. BoJ Governor Kazuo Ueda told a meeting of securities firms on Tuesday that the BoJ will keep raising rates, and that promise could force a Yen repricing if the report the BoJ publishes after its October 29-30 meeting signals a faster pace.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.