Pound Sterling steadies above two-week low vs USD; bulls seem hesitant amid Iran tensions

GBP/USD struggles to attract any meaningful buyers as rising US-Iran tensions support the USD.
Renewed inflation concerns fuel hawkish Fed expectations and further underpin the Greenback.
Rising BoE rate hike bets hold back bears from placing fresh bets around the GBP and the pair.

Haresh Menghani FXStreet

The GBP/USD pair enters a bearish consolidation phase and trades around the 1.3465 region during the Asian session on Friday, just above a nearly two-week low set the previous day. Spot prices remain on track to snap a two-week winning streak and seem vulnerable to extend this week's rejection slide from the 1.3600 mark, or over a two-month high, amid a bullish US Dollar (USD).

Despite a temporary extension of the US-Iran ceasefire, investors remain concerned over intensifying tensions in the Middle East amid the lack of progress in peace talks due to the American blockade of Iranian ports. Furthermore, the US-Iran standoff over the Strait of Hormuz dampens hopes for a durable de-escalation. This might continue to underpin the Greenback's status as the global reserve currency and act as a headwind for the GBP/USD pair.

Meanwhile, continued disruptions to energy supplies through the strategic waterway remain supportive of elevated Crude Oil prices and continue to fuel worries about a significant surge in global inflation. This could prompt a more hawkish stance from major central banks, including the US Federal Reserve (Fed). The outlook could turn out to be another factor lending support to the USD and validating the negative outlook for the GBP/USD pair.

That said, market bets on Bank of England (BoE) rate hikes increased following the release of stronger-than-expected UK PMI data on Thursday. In fact, traders are currently pricing in a roughly 60 basis points (bps) of tightening by end-2026 and a 70% chance of a rate hike in June. This, in turn, is holding back traders from placing aggressive bearish bets around the British Pound (GBP) and helps limit the downside for the GBP/USD pair.

Moving ahead, Friday's economic docket features the release of the UK Retail Sales report and the revised University of Michigan US Consumer Sentiment Index. This could provide some impetus during the latter part of the day. The market focus, however, remains glued to geopolitical developments, which might continue to infuse volatility across the global financial markets and produce some meaningful trading opportunities around the GBP/USD pair.

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by the Office for National Statistics on a monthly basis, measures the volume of sales of goods by retailers in Great Britain directly to end customers. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the previous month. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

AUD/USD meets support near 0.7150

AUD/USD comes under renewed and quite strong selling pressure ahead of the Asia opening bell on Friday, drifting back toward multi-day troughs near 0.7150, where it seems to have met some decent contention for now. The Aussie’s decline follows the inflation-reignited uptick in the Greenback in response to robust US factory-gate prices in August.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold remains weak, retargets $4,350

Gold keeps the choppy price action on Thursday, now slipping back toward the $4,350 region per troy ounce amid the robust bounce in the US Dollar as well as rising US Treasury yields across the curve, particularly following US Producer Prices and ahead of Friday’s more relevant US CPI data.

Bitcoin holds steady on positive ETF flows despite short-term holders cashing in

Bitcoin's exchange-traded funds (ETF) demand regime has notably shifted, with 30-day net inflows reaching $21.9 billion, according to a Thursday post by CryptoQuant. The data suggests that the average Bitcoin held through spot ETFs is now in profit, with the realized price of the ETF cohort standing at roughly $72,000 to $73,000.

ECB recap: A hawkish hike despite downside growth risks

The European Central Bank (ECB) increased the Deposit Facility Rate to 2.50%, the Refinancing Rate to 2.65% and the Marginal Lending Facility to 2.90%, effective from September 16. The decision was accompanied by a clear warning that the outlook remains highly uncertain, with risks tilted to the upside for inflation and to the downside for growth.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.