Easing Iran war concerns lift British Pound back to 1.3400 ahead of US CPI

• A rise of over 0.50% in GBP/USD reflects firmer sentiment as geopolitical concerns recede.
• Robust payrolls lift the probability of a December Fed rate increase to 82%.
• Forecasts put US headline CPI at 3.9% and core inflation at 2.8%.

The latest US inflation report is next on traders’ agenda after last Friday’s Nonfarm Payrolls release. Against that backdrop, Pound Sterling rises over 0.50% against the US Dollar on Monday, supported by US President Trump’s efforts to play down the prospect of escalation in the US-Iran war. GBP/USD is trading above 1.3400.

GBP/USD climbs as easing geopolitical concerns weigh on the US Dollar ahead of US CPI

Despite the US Navy blockade remaining in place, Trump’s remarks continue to buoy sentiment. The IRGC claimed that Hormuz is closed to unauthorised transit. US equities begin the session higher, with bulls buying the dip after the sell-off that followed the Democrats’ US midterm election victory. The US Dollar, meanwhile, loses ground.

At 101.91, the US Dollar Index (DXY) is 0.36% lower, lending support to GBP/USD. The index tracks the dollar against six currencies.

A 7-2 vote delivered a Bank of England rate increase last week, with both dissenters favouring a bigger rise. Despite the hawkish nature of the decision, BoE Governor Bailey challenged the prospect of second-round inflation effects, saying there was no clear evidence of them.

Forthcoming UK Gross Domestic Product (GDP) data could help clarify the interest-rate outlook and the impact of elevated energy prices.

Last week’s strong US employment figures brought the Unemployment Rate down to 4.1% from 4.2%. The report prompted a modestly hawkish shift in market pricing for the Federal Reserve’s December meeting.

According to the CME FedWatch Tool, the probability of a Fed rate increase now stands at 82%, compared with 76% last Friday.

At the time of writing, Chicago Fed President Austan Goolsbee struck a hawkish tone. He said services inflation was starting to “pick up,” described it as a “big problem,” and said the Fed needed to come to terms with its failure on inflation.

Tuesday’s US Consumer Price Index (CPI) release is now in focus. Headline inflation is expected to reach 3.9% YoY, up from 3.7%, while the forecast for core CPI is 2.8% YoY, compared with 2.6% previously.

GBP/USD Price Forecast: Technical signals favour further gains

Trading at 1.3402 on the daily chart, GBP/USD retains a constructive bullish bias above the latest cluster of three simple moving averages at 1.3359, which now supports the rise. Further underpinning the technical structure, the pair remains above both the previously broken descending trend line, with a breakout reference near 1.3228, and the more recent descending trend-line breakout around 1.3376. Momentum supports this positive picture: the 14-period Relative Strength Index is around 54, indicating sustained bullish pressure rather than overbought conditions. An elevated FXS Fed Sentiment Index also points to a macroeconomic backdrop that remains favourable for sterling.

Initial downside support lies around 1.3376, the recent trend-line breakout zone. Below that, the cluster of three simple moving averages near 1.3359 provides a technical floor, followed by deeper structural support around 1.3228, where the earlier break above the long-term descending trend line occurred. On the upside, the next notable resistance is around 1.3696 at the broken rising support trend line drawn from 1.3140. A further hurdle lies near 1.3865 at the other broken rising trend line, where previous selling interest could limit additional gains unless buying pressure strengthens.

(The technical analysis of this story was written with the help of an AI tool. Know more.)