GBP/USD slips as Iran hope fades and Dollar firms

The Dollar Index rebounded from a three-month low near 97.60 as US-Iran de-escalation hopes faded on Thursday.
Friday's US Nonfarm Payrolls report is the key macro catalyst for the pair after a busy week of Fed speakers.
The lack of meaningful UK economic data this week left Sterling traders fully reliant on US-side dynamics for direction.

Joshua Gibson FXStreet

GBP/USD edged slightly lower to around 1.3550 on Thursday, lower around 0.3% after the pair touched a session high near 1.3645 before turning back down. Price has been holding a roughly 100-pip range below the multi-month peak just under 1.3660, with a series of overlapping candles after the strong rally off May 1 swing lows close to 1.3450.

For the US Dollar (USD), the overarching driver remains the US-Iran ceasefire narrative and the Strait of Hormuz situation. Wednesday's slide for the Greenback came as the White House signaled it was close to a memorandum of understanding with Tehran, alongside President Trump's pause on the US-led effort to assist stranded vessels exiting the strait while fresh talks proceed. That backdrop pulled the Dollar Index down toward 97.60, a three-month low, before Thursday's modest rebound as some of the optimism trade unwound. A heavy slate of Federal Reserve (Fed) speakers including Collins, Hammack, Daly and Williams kept rate expectations in flux ahead of Friday's US Nonfarm Payrolls (NFP) print, where consensus stands close to 62K against a prior 178K.

On the Pound Sterling (GBP) side, the calendar this week is unusually thin, with no first-tier UK data releases scheduled. That leaves Sterling almost entirely a function of broad USD direction, with the Iran narrative and Friday's NFP print expected to dictate near-term moves. UK yields have continued to firm against the backdrop of sticky inflation expectations, but the absence of fresh domestic catalysts means the pair will likely take its cue from the Greenback through the end of the week.

GBP/USD 4-hour chart

Technical Analysis

In the four-hour chart, GBP/USD trades at 1.3550. The pair holds comfortably above the 200-period exponential moving average (EMA) at 1.3488, keeping the near-term bias constructive despite the recent pullback from this week’s highs. The location of price over the long-term EMA suggests underlying demand remains in place, while the Stochastic RSI around the mid-50s hints at neutral-to-moderate bullish momentum rather than an overextended market.

On the downside, initial support is seen at the 1.3500–1.3488 area, where the psychological handle converges with the 200-period EMA and should act as a key floor on further weakness. As long as GBP/USD holds above this zone on a closing basis, dips are likely to remain shallow and the broader recovery structure intact, with buyers expected to re-emerge on tests of that moving average.

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

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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