GBP/USD opened the new week on the soft side, dipping to a session low near 1.3380, but staged a strong recovery through Monday's session to close around 1.3510, up 0.35% on the day. The move pushed the pair to its highest level since late February, decisively reclaiming the 1.3500 handle for the first time since the sell-off that followed the outbreak of the Iran conflict. The pair has now rallied over 350 pips from the early April low close to 1.3160, erasing roughly half of the decline from the year-to-date high near 1.3870.
President Trump's announcement of a US blockade of the Strait of Hormuz, following the collapse of weekend peace negotiations in Pakistan, initially sparked a risk-off start to the trading week and weighed on Pound Sterling. However, sentiment tilted back through Monday's session as markets grew increasingly hopeful that a resolution will eventually emerge, despite a constant moving of the goalposts on a peace deal. The resulting shift in risk appetite softened the US Dollar broadly and allowed GBP/USD to recover.
Coming up: US PPI inflation data hot in the pipe for Tuesday
Looking ahead to Tuesday, the March Producer Price Index (PPI) will be the first major US inflation print to capture the initial price impacts from the Iran war, which started in late February. Headline PPI is expected to rise 1.2% MoM, up from 0.7% in February, with the YoY reading forecast to jump to 4.6% from 3.4%. Recent Federal Reserve (Fed) minutes showed a growing number of policymakers willing to consider a rate hike if war-driven energy costs feed through to broader inflation, and a hotter-than-expected PPI print could sharpen that debate. Five Fed speeches from Goolsbee, Barr, Barkin, Collins, and Paulson round out a busy Tuesday session.
On the Pound Sterling side, the UK's exposure to the energy supply shock is a growing concern. UK Consumer Price Index (CPI) inflation is expected to rise to between 3% and 3.5% over the coming quarters as the closure of the Strait of Hormuz drives higher fuel and utility costs through to households and businesses. Before the conflict began, UK inflation had been trending lower toward the 2% target, but the war has upended that trajectory and markets have shifted from pricing rate cuts to pricing potential hikes. Rising energy import costs are also weighing on consumer sentiment and business margins, creating a stagflationary risk that could limit Pound Sterling's upside even as the US Dollar weakens.
GBP/USD daily chart
Technical Analysis
In the daily chart, GBP/USD trades at 1.3513, extending a constructive bullish bias as spot holds above both the 50-day exponential moving average (EMA) at 1.3395 and the 200-day EMA at 1.3367. The short-term trend tone remains positive while price respects this stacked moving-average support, although the Stochastic RSI near 71 hints at overbought conditions and suggests upside momentum could be at risk of fatigue in the near term.
On the downside, initial support is now aligned at the 50-day EMA around 1.3395, with the 200-day EMA at 1.3367 reinforcing a secondary demand area below. As long as GBP/USD remains above this moving-average cluster, bulls are likely to defend dips, and any corrective pullback would be viewed as a retracement within the broader uptrend rather than a trend reversal.
Comments
Log in or sign up to join the conversation.