The delicate US-Iran ceasefire, coupled with ongoing regional attacks, has maintained a spotlight on geopolitical risks. US PCE inflation remained steady, and labor market indicators showed continued strength. The expectations for a Bank of England rate hike, coupled with a weaker Dollar, contribute to the ongoing support for Sterling. The GBP/USD pair moves above the 1.3400 level on Thursday as risk appetite weakens. The ceasefire in the Middle East appears tenuous, with Israel conducting strikes in Lebanon during its ongoing conflict with Hezbollah. Currently, the pair is trading at 1.3441, reflecting an increase of 0.36%. Wall Street trades barely unchanged, while the Greenback shows signs of life, trimming some of its earlier losses according to the US Dollar Index. The DXY, reflecting the dollar’s strength against a basket of six currencies, has increased by 0.01% to 99.01, following a 1% drop over the past two days.
Geopolitical factors persistently influenced market movements, with indications suggesting that Iran will not permit access to the Strait of Hormuz, as Tehran insists that the ceasefire agreement encompasses Lebanon. In the meantime, Israel has ramped up its military operations, resulting in over 250 fatalities, raising concerns about a potential escalation of the conflict in the area. Data from the US indicated that inflation in February increased by 0.4% month-over-month, surpassing the previous month’s figure of 0.3%. Over the twelve-month period leading up to February, the Personal Consumption Expenditures Price Index increased by 2.8%, consistent with the rate observed in January. The core figures, regarded by the Federal Reserve as its favored inflation measure, registered a 0.4% month-over-month change for the same period, aligning with expectations and remaining steady from January. Over the entire year, prices decreased from 3.1% to 3%, in line with projections.
Traders’ expectations for Fed rate cuts have not shifted, as indicated by money markets, which project six basis points of easing by year-end, based on the CME FedWatch Tool. The jobs data remained robust, despite Initial Jobless Claims for the week ending April 4 rising from 203K to 219K last week, surpassing the anticipated figure of 210K. The print was marginally higher than the 4-week average of jobless claims at 209.5K, while Continuing Claims saw a reduction of 38K, bringing it down to 1.794K, marking its lowest point since May 2024. The economic calendar in the UK is limited, but the British Pound has continued to strengthen, driven by a heightened risk appetite and anticipations of additional rate increases from the Bank of England. According to information from Prime Market Terminal, market expectations indicate that the BoE is likely to implement a rate hike during the June 18 meeting, with a modest 21% probability of a rate increase on April 30. Throughout the year, market participants anticipate a tightening of 39 basis points. Looking ahead, GBP/USD traders will focus on the US Consumer Price Index report for March, which is anticipated to reveal a significant rise, particularly in the headline figure, increasing from 2.4% to 3.3%. The projection indicates an increase in Core CPI from 2.5% to 2.7%.
On the daily chart, GBP/USD is currently positioned at 1.3437. The pair is positioned slightly below the recent simple Moving Average Triple reading at 1.3439, which restricts price movement due to this grouping of medium-term averages, thereby sustaining a mildly bearish outlook as long as it stays beneath that level. The previously resisted downtrend line, noted around 1.3137, now lies significantly below the current level, suggesting that the overarching structure continues to protect the downside, despite upward efforts being hindered by moving-average resistance. On the topside, immediate resistance is positioned at the simple Moving Average Triple around 1.3439. A sustained break above this level is necessary to alleviate the current cap and reveal the higher reference area near the previous uptrend support line around 1.3785. On the downside, initial support is indicated by the reclaimed downtrend line region near 1.3137, where a break lower would reintroduce deeper losses within the broader bearish structure.