Sterling is likely to remain on the defensive in the near-term as it grapples with a volatile landscape defined by geopolitical instability and a hawkish shift in domestic monetary expectations.

The ongoing tensions in the Middle East, marked by uncertainty over the U.S.-Iran ceasefire, have fueled broad USD haven buying, keeping the pound under persistent downward pressure.

This bearish sentiment is compounded by mounting UK inflation and growth worries.

The resurgence in oil prices over the last week has shifted the policy narrative from potential rate cuts to necessary hikes to stall inflation. Unfortunately, those higher rates would also hurt UK economic growth, creating a drag on sterling.

While a recent decline in long-term gilt yields has provided a rare bright spot by relieving some fiscal pressure on the currency, any flare-up in Iran hostilities could offset this.

Technically, GBP/USD is struggling to maintain its footing, currently trading at 1.3493 and hovering just above the Ichimoku conversion line of 1.3491.

Immediate resistance is situated at the Monday and Tuesday high area near 1.3545, with a more significant ceiling at 1.3599, the daily high on Apr 17.

A breach of the 1.3610 upper Bollinger band would be required to neutralize the current bearish bias. On the downside, a break below the April 20 low at 1.3475 would open the way for a test of more significant support by the 200-DMA at 1.3414 and daily cloud base at 1.3408.

Current momentum strongly indicates that the path of least resistance is skewed downwards, a consequence of the prevailing geopolitical and economic stasis.
Sterling Chart:


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