GBP/USD rose to 1.3599 on Thursday, as sterling approached its peak levels since mid-February in the preceding session. The pound is experiencing increased support due to a decline in demand for the US dollar as a safe-haven asset, coinciding with rising optimism regarding a potential agreement between the US and Iran. It was reported that the White House is nearing the finalization of a framework memorandum with Iran, which may facilitate the resolution of the conflict and initiate nuclear negotiations. Tehran’s response is anticipated within the next 48 hours, although a definitive agreement remains unachieved.
Investors are closely observing local elections in the United Kingdom, as opinion polls indicate that Keir Starmer’s party may encounter significant losses. On the monetary policy front, there has been a slight shift in expectations regarding the Bank of England. Current market expectations indicate approximately 50 basis points of tightening by year-end, which translates to two rate hikes. Previously, investors had anticipated up to three rate hikes. On the H4 chart, GBP/USD is exhibiting a broad consolidation range above 1.3515, currently extending towards 1.3650. A potential corrective move downward towards 1.3344 remains plausible. Following this correction, the pair is likely to undergo a period of consolidation once more. A breakout higher would reopen the path towards 1.3650, while a downside move could extend losses towards 1.3344.
The MACD indicator corroborates this scenario, as the signal line remains above zero and is decisively trending downward, suggesting a waning bullish momentum. On the H1 chart, GBP/USD is currently positioned within a narrow consolidation range near 1.3615. The range has shifted downward to 1.3578, with the pair making an effort to recover towards 1.3615 as it tests this level from beneath. Subsequently, a further decrease towards 1.3565 could ensue. The Stochastic oscillator corroborates this perspective, as the signal line remains beneath 50 and trends downward toward 20, indicating a growing short-term downside pressure.
Sterling continues to find support from an enhancement in global risk sentiment coupled with a decline in demand for the US dollar as a safe haven asset. Nonetheless, the prevailing political uncertainty in the UK, coupled with evolving expectations regarding the Bank of England’s policy, may constrain additional upward movement. In the short term, GBP/USD is expected to exhibit significant responsiveness to geopolitical developments and overall market sentiment.