British Pound edges higher vs softer USD; lacks follow-through as geopolitics cap gains
The GBP/USD pair attracts some dip-buyers during the Asian session on Friday and, for now, seems to have snapped a two-day losing streak to the weekly low, which it touched the previous day.
On Friday, the British Pound edged higher against the US Dollar, but the gains were short-lived as geopolitical factors capped the upward movement. Instead of building on the 1.3500 level, the GBP/USD pair struggled to surpass this psychological mark, prompting some caution among bullish traders. Reports of a softer US Producer Price Index (PPI) on Thursday led traders to lower their expectations for Federal Reserve (Fed) rate hikes.
Meanwhile, the US Consumer Price Index (CPI) release on Wednesday suggested signs of cooling inflation, which gave the US Dollar more room to hold steady. This in turn provided support to the GBP/USD pair, though uncertainties surrounding the Middle East crisis limited the downside for the safe-haven Greenback. US Treasury Secretary Scott Bessent announced that Washington would implement unprecedented measures against Iran, while an IRGC adviser stated that Tehran's strategy aims to make conflicts so costly that future US administrations would hesitate to take military action against Iran.
The ongoing US-Iran standoff over the Strait of Hormuz kept the geopolitical risk premium alive, adding to the caution for USD bears. Trump reiterated that the US controls the strategic waterway, while Iran pledged to keep it closed until all demands were met. The mixed UK macro data on Thursday further restrained gains for the British Pound (GBP) and the GBP/USD pair.
With no significant economic releases scheduled for the UK on Friday, while the US market featured monthly Retail Sales and the Preliminary University of Michigan Consumer Sentiment Index, the GBP/USD pair's fate might be influenced by Fed speeches and incoming geopolitical headlines. The GBP/USD pair stayed above the 100-period Simple Moving Average (SMA) on the 4-hour chart, indicating a constructive near-term bias.
Should a break below the support level at 1.3422 occur, it could signal a deeper corrective phase. Nonetheless, the broader structure still favors buying dips above the 100-SMA pivot support.
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