Key Moments
- GBP/USD trades with modest losses near 1.3550 in early Tuesday Asian dealings as the US Dollar gains.
- Rising Middle East tensions and hawkish comments from Fed Chair Kevin Warsh are bolstering demand for the Greenback.
- Markets await the US ISM Manufacturing PMI on Tuesday and key August labor data on Friday for the next policy signals.
Dollar Strengthens as Geopolitics and Fed Outlook Drive Flows
The GBP/USD pair is softer in Tuesday’s early Asian session, changing hands around 1.3550 with mild losses as the US Dollar edges higher against the British Pound.
The move comes against a backdrop of escalating tensions in the Middle East and a firmer outlook for US interest rates following Federal Reserve (Fed) Chair Kevin Warsh’s comments at the Jackson Hole symposium.
Middle East Escalation Supports Safe-Haven Demand
US President Donald Trump on Monday threatened to respond forcefully against Iran after the United States and Iran exchanged fire for the first time in a month. In parallel, Iran’s Revolutionary Guard Corps (IRGC) stated that it targeted US military bases in two Middle Eastern countries in reaction to the first US strikes on Iran in weeks.
Adding to the risk backdrop, the United Kingdom Maritime Trade Operations (UKMTO) reported late Monday that a tanker sailing out of the Strait of Hormuz had been hit by three projectiles, according to Reuters. Heightened geopolitical risk is seen as supporting safe-haven flows into the US Dollar, posing a headwind for GBP/USD.
Fed’s Hawkish Tone Lifts September Hike Expectations
Fed Chairman warned on Friday that inflation is not slowing significantly, and that unless policymakers become confident it is, the central bank has “work to do.” Following Warsh’s remarks, market participants increased wagers on a potential rate increase at the Fed’s September meeting.
Key US Data in Focus: ISM Manufacturing and Jobs Report
Traders are now closely watching the US ISM Manufacturing Purchasing Managers Index (PMI), scheduled for release later on Tuesday. Attention is then expected to shift to the August employment data on Friday. A softer-than-anticipated reading could weigh on the US Dollar in the near term.
BoE Outlook: Markets Price in Further Tightening
On the UK side, expectations for additional Bank of England (BoE) tightening remain in place. Strategists at Scotiabank note that market pricing continues to lean toward further rate increases, with investors assigning “a ~60% chance of a 25bpt at the next BoE meeting on September 16” and “a cumulative 36bpts of tightening by year-end.”
They further emphasize that, from a sentiment standpoint, “the October 28 budget… will remain a key focus for markets over the next couple of months,” highlighting how closely fiscal developments are being monitored as part of the broader UK policy backdrop.
GBP/USD Technical Picture
On the daily chart, GBP/USD is quoted at 1.3546. The pair shows a slight bullish inclination, with spot trading above the 100-day simple moving average (SMA) at 1.3444 and the lower Bollinger Band at 1.3433, indicating demand on downside moves. At the same time, the pair is testing the Bollinger middle band around 1.3550, which is acting as near-term resistance, while the Relative Strength Index (RSI) at 53.3 signals firm but not excessive upward momentum.
| Level | Indicator | Price |
|---|---|---|
| Spot | GBP/USD | 1.3546 |
| Nearby resistance | Bollinger 20-period SMA (middle band) | 1.3550 |
| Next resistance | Upper Bollinger Band | 1.3668 |
| First support | 100-day SMA | 1.3444 |
| Second support | Lower Bollinger Band | 1.3433 |
| Momentum | RSI | 53.3 |
On the upside, the initial barrier is located at the Bollinger 20-period SMA near 1.3550, ahead of the upper Bollinger Band around 1.3668. On the downside, support is seen first at the 100-day SMA at 1.3444, followed by the lower Bollinger Band at 1.3433, where dip-buying interest would be anticipated if a corrective move develops.
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