Pound steadies as USD firms on Fed bets, Iran risks

The pound struggled to extend gains against the dollar on Monday, with GBP/USD failing to build on a modest intraday bounce as fresh US dollar buying capped its recovery.

Optimism over a potential US-Iran nuclear deal faded quickly after renewed hostilities in the Strait of Hormuz and widening disagreements over Tehran's nuclear programme.

That, combined with reviving expectations for a more hawkish Federal Reserve, weighed on the pair's rebound from the 1.3550–1.3545 support zone.

Sterling found some support from the Bank of England, which signalled that further rate increases could be appropriate if inflation remains persistent.

Easing concerns over Prime Minister Keir Starmer's political position also underpinned the pound, limiting the downside.

Technical outlook

The pair holds above the 100-period exponential moving average, suggesting a mildly constructive near-term bias.

Momentum indicators are mixed: the relative strength index hovers near the neutral 50 mark, while the moving average convergence divergence has slipped marginally back below zero.

That combination points to tentative rather than impulsive upside.

Traders may prefer to wait for a sustained break above the 1.3635 horizontal barrier, alongside a decisive turn higher in momentum indicators, before treating the pair's broader advance of the past month as resuming.

On the downside, initial support sits at the 100-period EMA around 1.3538.

A break below that level would expose the pair to a deeper correction toward prior lows.

As long as GBP/USD holds above that moving average, buyers retain a short-term edge.