Expect continued volatility for sterling in the near-term, with risks tipped to the downside, as global geopolitical tensions and domestic policy adjustments create a complex backdrop. The pound experienced slight weakness today, trading down at 1.3414 after comments out of Iran revealed the Supreme Leader is refusing to hand over the nation's enriched uranium supply. This refusal has exerted broad downward pressure on risk assets, pulling GBP/USD lower from an open of 1.3440. However, Iran is not the only issue weighing on the currency pair. As a by-product of the Middle East conflict and its deleterious effects on inflation and global growth, UK Finance Minister Rachel Reeves announced measures to lower costs for consumers, including reduced sales taxes on summer expenses and a suspension of food import tariffs. While these actions are unlikely to derail the budget, they keep the spotlight on UK fiscal vulnerabilities despite a slight reduction in UK 10-year gilt yields below 5%, particularly given the fluid political situation.

Technically, GBP/USD remains locked in a tight 1.3300–1.3475 range, with the flat 200-DMA 1.3424 acting as a magnet. Daily price action underscores this hesitation; despite repeated breaches of the 200-DMA, long upper candlestick wicks hint at reluctance by traders to test new highs above the May 20 peak of 1.3476.

If risk aversion intensifies, initial support aligns at the daily low of 1.3402, followed closely by the lower Bollinger Band at 1.3371. Conversely, near-term resistance is established at the daily high of 1.3455, with a more formidable ceiling guarded by the 100-DMA at 1.3478.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)