GBP/USD. Analysis and Forecast

The GBP/USD pair is trading above the round 1.3400 level. The U.S. dollar is attracting new buyers following yesterday's correction from a three-month high and remains the main factor putting pressure on the GBP/USD pair. Investors are awaiting further developments in the Middle East.Iran's Islamic Revolutionary Guard Corps (IRGC) rejected statements by U.S. President Donald Trump about the imminent end of the war, emphasizing that Tehran—not Washington—will determine its timeline. This increases geopolitical risks and boosts interest in traditional safe-haven assets such as the U.S. dollar. In addition, risks of supply disruptions remain due to the potential blocking of the Strait of Hormuz, which has allowed oil prices to regain positive momentum after Monday's sharp reversal from the highest level seen since June 2022.

Investors fear that rising energy prices could reignite inflation and delay the easing of policy by the U.S. Federal Reserve. This supports higher yields on U.S. Treasury bonds, further strengthening the dollar and limiting gains in GBP/USD. However, the British pound is receiving support from a reassessment of interest-rate expectations.In fact, expectations of three rate cuts by the Bank of England have given way to roughly a 70% probability of a rate hike by the end of the year. Such a shift could provide the GBP/USD pair with additional momentum, turning intraday corrections into buying opportunities.

Market participants may wait for a speech by Bank of England Governor Andrew Bailey on Thursday, which could set a new tone for market sentiment.

Investors will also focus on U.S. inflation data this week—the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index—as well as the UK's monthly GDP data, all of which may influence the dynamics of the GBP/USD pair. However, geopolitical news continues to dominate, driving market volatility and shaping the trajectory of the U.S. dollar.

From a technical perspective, oscillators on the daily chart are negative, indicating an advantage for the bears. Nevertheless, the pair is attempting to break above the very important 200-day SMA, located around 1.3445. A successful break above this level would shift the current trading range and allow bulls to challenge the 20-day SMA near the round 1.3500 level.

The main support lies at the 1.3400 round level. If this level fails to hold, prices could accelerate their decline toward the 1.3300 round level.