GBP/USD rose on Thursday as reports suggested the US and Iran were nearing a peace deal, which could reopen the Strait of Hormuz, while leaving matters such as Iran’s nuclear programme unresolved. The pair was up about 0.28% and traded at 1.3627 at the time of writing, extending gains to a third day.
During the European session, GBP/USD was around 1.3620, up 0.18%, as the US dollar faced selling pressure linked to expectations of an agreement. The move kept the pair near the 1.3600 area.
Short Term Technical Outlook
Technical commentary pointed to a firmer short-term tone, with the pair rebounding from the lower edge of an ascending channel. It also cited support from the 20-day EMA and referenced potential upside towards 1.3700.
We recall the optimism back in 2025 when GBP/USD was trading around the 1.3600 level, driven by hopes that a US-Iran peace deal would weaken the dollar. Today, the landscape is markedly different as that deal never fully materialized, and the pair has trended lower. This shift reminds us how geopolitical sentiment can quickly reverse course.
Currently, the dollar’s strength is a primary factor, underpinned by a more hawkish Federal Reserve compared to the Bank of England. Recent US jobs data showed the economy adding over 210,000 jobs last month, reinforcing the Fed’s stance to keep interest rates elevated. This policy divergence is putting sustained pressure on the pound.
In the UK, we are contending with stubbornly high inflation, which registered at 3.5% in the latest reading, alongside slowing economic growth. This puts the Bank of England in a bind, making further rate hikes that would support the pound less likely. The market is now pricing in a potential rate cut by the end of the year, which wasn’t the case in 2025.
Positioning For A Stronger Dollar
For the coming weeks, we should consider strategies that benefit from a stronger dollar and a weaker pound. Buying put options on GBP/USD with a strike price around 1.2450 could offer protection against further declines. Implied volatility has increased recently, suggesting the market expects bigger price moves, so using spreads like a bear put spread could help manage the higher premium costs.
