GBP/USD is likely to remain volatile and pressured in the near term due to escalating Middle East tensions and mixed economic signals from the UK and U.S.

The rising Middle East tensions sapped the pound, stirring a retreat from recent trend highs above 1.36 and a dip to session lows, underscoring sterling's sensitivity to global risk sentiment.

Though uncertainties about U.S. President Donald Trump’s trade policies had weighed on the dollar in recent months and created doubts about its safe-haven role, the events in Iran appear to have revived its status as a sought-after currency in troubled geopolitical times.

Meanwhile, fundamental factors such as relative interest rate expectations between the U.S. and UK remain aligned, suggesting that significant deviations from current GBP/USD levels might be limited.

Both economies are showing signs of slowing, which could prompt dovish stances from the Federal Reserve and Bank of England, potentially stabilizing the currency pair around its current levels.

Sterling is trading at the lower end of its recent range, with key support at the 21-DMA, currently at 1.3492, and resistance marked by Friday's fresh 2025 high at 1.3633. While sterling remains range-bound, technical indicators suggest that risks for a move higher remain, barring any escalation in geopolitical tensions.

However, should sterling close below 21-DMA support at 1.3492, it could shift momentum to bears, putting the May 29 low of 1.3417, and mid-May lows by 1.3150, into sharper focus.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)