On Thursday, the exchange rate for GBP/USD was recorded at 1.3364. The pair experienced a decline over the last two sessions and is currently exhibiting signs of a cautious recovery, influenced by expectations surrounding a potential de-escalation in the Middle East conflict. The United States has reportedly put forth a 15-point settlement plan to Iran after engaging in discussions regarding a possible month-long truce. Nevertheless, Iran has dismissed the prospect of engaging in negotiations, asserting that US diplomatic efforts lack credibility. In the UK, February inflation figures aligned with forecasts. Headline CPI remained unchanged at 3%, whereas core inflation experienced a modest increase to 3.2%, surpassing the anticipated 3.1%. Nonetheless, the data exerted minimal influence on the market, as it represented circumstances that existed before the recent intensification in the Middle East.
In light of declining oil prices, investors are adjusting their forecasts regarding the policy stance of the Bank of England. The market currently anticipates fewer than two rate hikes before the end of the year, with the total expected tightening now estimated at around 68 basis points, a decrease from nearly 75 basis points previously. The H4 GBP/USD chart indicates that the market is establishing a wide consolidation range centered around 1.3354, currently reaching as high as 1.3434. A decrease to 1.3255 is anticipated in the short term, succeeded by the establishment of a new consolidation range. An upward breakout would facilitate a continuation wave towards 1.3494, whereas a downward breakout would indicate potential movement towards 1.3119. This scenario is substantiated by the MACD indicator, which shows its signal line positioned above zero and directed decisively downwards.
On the H1 chart, the market has established a tight consolidation range centered around 1.3355. A downside breakout has commenced a wave structure targeting 1.3255. If this level is breached, a further decline towards 1.3125 appears probable. Conversely, an upside breakout from the range could initiate a growth wave to 1.3494. This scenario is substantiated by the Stochastic oscillator, which exhibits a signal line positioned below 20 and directed decisively downwards. The GBP/USD exchange rate is currently influenced by conflicting dynamics, characterized by short-term fluctuations stemming from geopolitical developments. While tentative signs of a potential US–Iran truce have provided some relief to markets, Iran’s rejection of negotiations highlights the precarious nature of expectations for de-escalation.
In the interim, the inflation data from the UK, while consistent with projections, has been predominantly disregarded due to its timing prior to the escalation. Declining oil prices have led markets to reduce their forecasts for Bank of England tightening, providing slight support for the pound. Given the technical indicators suggesting ongoing consolidation and the fluidity of the situation in the Middle East, the near-term trajectory of the pair is expected to depend significantly on subsequent geopolitical developments.