The GBP/USD pair is finding some support around 1.3370, although it saw a slight dip on Monday and remains under 1.3400. So far, it appears to have halted a pullback following Friday’s nearly four-week high close to 1.3450, despite mixed economic signals.
Andy Burnham, the former mayor of Greater Manchester, has garnered the backing of a substantial number of Labor MPs to potentially succeed Keir Starmer as the next prime minister. This development seems to ease worries about political instability in the UK. Additionally, there’s speculation about at least one 25 basis point rate hike from the Bank of England by the end of 2026, which has lent some support to the British pound. Yet, escalating tensions between the US and Iran could favor the safe-haven US dollar, potentially limiting further advances for the GBP/USD pair.
In response to recent developments, the US military has intensified its strikes against Iran, especially after the Islamic Revolutionary Guards Corps (IRGC) claimed to have closed the Strait of Hormuz and targeted another commercial vessel. Following this, the Iranian government retaliated with attacks on US military facilities in the region, drawing interest toward safe-haven assets. Rising oil prices are further stirring inflation fears, also stoking expectations of interest rate hikes from the US Federal Reserve, which benefits the US dollar and might cap any significant gains for GBP/USD.
No major economic indicators are expected to come out of either the UK or the US on Monday, meaning that spot prices will largely reflect the movement of the US dollar. During the upcoming North American trading session, market participants will likely focus on comments from notable Federal Open Market Committee (FOMC) members. However, attention is still tilted towards the latest US inflation figures, injecting some momentum into the dollar and the GBP/USD pair later this week.
