Sterling is poised for continued downside pressure against the U.S. dollar in the near term, as a confluence of geopolitical anxieties, domestic headwinds, and monetary policy divergence weigh on GBP/USD.

The recent shift to the lower end of its 1.33-1.35 range reflects heightened Middle East uncertainties, with the ongoing U.S.-Iran standoff casting a shadow despite discussions of a potential agreement. The ambiguity surrounding whether any deal would involve Iran relinquishing nuclear material adds to the caution. Beyond near-term geopolitical noise, structural headwinds for cable endure. The UK's political, fiscal, and economic landscape — characterised by inflationary pressures and sluggish growth — continues to weigh on sterling. The monetary policy convergence between the BoE and the Fed represents the more consequential driver. Although the BoE is expected to deliver modest rate increases of around 50-basis points in 2026, recent communications from BoE officials signal a cautious, data-dependent approach, with policymakers awaiting clearer evidence on second-round inflation before accelerating tightening.

This measured stance stands in contrast to decidedly more hawkish Fed expectations, underpinned by persistent U.S. inflation — a dynamic likely to cap GBP/USD gains even if a definitive Middle East peace deal is announced.

Technically, resistance for GBP/USD is identified at the daily cloud base around 1.3409 and the flat 200-DMA at 1.3419. More significant resistance lies in the 1.3500/09 region, marking late-May highs. Support is anticipated around recent lows at 1.33, with the 100-WMA at 1.3184 offering further downside protection, having tracked the price since early March 2025.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)