Market Update: GBP/USD Under Pressure Amid Rising Energy Prices
The GBP/USD exchange rate faced downward momentum on Thursday morning, prompted by soaring energy prices stemming from heightened tensions in the Middle East. It decreased by 1.35% from earlier highs, settling at 1.3370.
Inflation Concerns Amid US-Iran Tensions
This decline in GBP/USD coincided with a rise in the US dollar index, which reached 101.13, marking its highest point in over a week. Investors are responding to the ongoing exchange of threats between the United States and Iran.
Recently, President Trump stated that the U.S. plans to target Iranian bridges and power plants in retaliation for Iranian assaults on vessels. Conversely, Iran’s parliament speaker mentioned that Gulf nations would face challenges in exporting oil as long as current blockades are in place.
Additionally, oil prices continued their ascent as traffic through the Red Sea slowed down due to threats from Ansar Allah regarding its closure. This trend raises concerns that Brent and West Texas Intermediate (WTI) prices could keep climbing in the near future.
The recent inflation report from the Office for National Statistics (ONS) also played a role, indicating that the headline consumer price index (CPI) dipped to 2.6% in June from 2.8% in May. Core inflation stayed steady at 2.6%, matching the previous month.
While these figures might seem positive, there are fears that inflationary pressures may surge again as ongoing conflicts threaten global energy prices and supply chains.
This uncertainty has led traders to speculate more on possible interest rate hikes from both the US Federal Reserve and the Bank of England this year. A recent Polymarket survey suggests there’s a 66% likelihood that the US Federal Reserve will raise rates, while the Bank of England’s chances hover around 30%.
As of today, there have been no significant macroeconomic announcements from the UK or the US, and all eyes are on the upcoming decisions from the Fed and BOE next week.
GBP/USD Technical Overview
A review of the daily chart reveals that the GBP/USD pair has been in a considerable downtrend over the past few days, falling from a high of 1.3558 earlier this month to 1.3375 currently.
The pair also sits below its 50-day exponential moving average (EMA), reaffirming the downtrend’s strength.
At the same time, the average directional index (ADX) has dropped to 15.7, the lowest point since June 10th. Consequently, while some investors are looking to buy at these lower levels, there could be an impetus for a pullback today. If that occurs, there’s potential for the price to rebound toward the psychological milestone of 1.3500.
