GBP/USD is receiving a welcome lift as risk sentiment improves on hopes that a peace deal can be reached before President Donald Trump’s Tuesday evening deadline for potential attacks on Iranian infrastructure, but the outlook remains troubled for sterling.

The pair is finding initial support ahead of the 1.3000–1.3150 congestion zone from late last year, helping to slow the two-month downtrend. Unrelated to geopolitical developments but supportive for bulls, sterling is also entering its seasonally strongest month in April.

That said, the broader backdrop remains challenging. Escalating conflict that keeps oil prices elevated and bond markets defensive tends to undermine GBP, as the USD captures the bulk of the haven flows. Rising global yields also rekindle concerns around the UK’s fiscal position. USD strength is reinforced by a hawkish stance from Fed officials amid persistent inflation risks. Monday’s ISM services survey showed ongoing expansion, with the prices paid component hitting its highest level since 2022. This week’s inflation slate, including Thursday's February core PCE and Friday’s March CPI, adds further event risk.

For GBP to reverse its bearish trend, stronger technical confirmation is required. Extremely bearish risk reversals and elevated option convexity suggest scope for a sharp, mean-reverting bounce.

Still, the pair must first reclaim the falling 21-day moving average at 1.3326 and challenge layered resistance below 1.35. A sustained break above 1.35 would tilt momentum back in favor of bulls; failure to do so risks a renewed test of key support just above 1.30, including the two-year ascending trendline.
GBP


(Robert Fullem is a Reuters market analyst. The views expressed are his own.)