remains near 1.3315 on Tuesday. The pound posted a modest gain the previous day but remains near three-month lows amid continued uncertainty over the impact of the Middle East conflict on the global economy and inflation. Investors continue to prefer the US dollar as a key safe-haven asset.
Since the start of the conflict involving Iran, the dollar has been the main beneficiary of safe haven demand, outperforming gold, government bonds and currencies such as the Swiss franc. Meanwhile, the pound has shown relative resilience compared to several other currencies: over the past three weeks, it has declined by about 1.7%, while the yen and euro have lost about 2.0% and 3.0%, respectively. This relative strength is partly due to the UK's lower dependence on energy imports and its higher interest rate environment.
The key event of the week is the Bank of England meeting on Thursday, where the rate is expected to remain unchanged at 3.75%. Markets are currently pricing in just one rate cut before the end of the year, marking a notable change from the two cuts forecast before the conflict escalated.
Attention will also focus on UK labor market data, which points to a gradual cooling in employment and a slowdown in wage growth. Against this backdrop, with persistent inflationary pressure and rising energy prices, the pound may face further headwinds if macroeconomic conditions continue to deteriorate.
Technical analysis
On the GBP/USD H4 chart, the market is forming a wide consolidation range around 1.3283, which currently extends to 1.3333. A drop to 1.3260 is expected in the near term, after which a new consolidation range is likely to form. A bullish break would pave the way for a continuation wave towards 1.3360, while a bearish break would suggest a further move towards 1.3133. Technically, this scenario is confirmed by the MACD indicator, whose signal line is below the zero level and clearly points upward.
On the H1 chart, the market has formed a compact consolidation range around 1.3315. A break lower has initiated a wave structure that extends to 1.3260. If this level is broken, a further decline towards 1.3125 is likely. Conversely, an upside breakout of the range could trigger a wave of growth towards 1.3350. Technically, this scenario is confirmed by the stochastic oscillator, with its signal line above the 80 level and pointing sharply downwards.
Conclusion
GBP/USD remains in a holding pattern ahead of Thursday's Bank of England decision, with the pound showing relative resilience compared to other major currencies despite remaining near three-month lows. The dollar continues to dominate as the preferred safe-haven asset amid ongoing tensions in the Middle East, while the change in rate expectations – from two cuts to just one – reflects the complex inflation dynamics facing authorities. With UK jobs data showing signs of cooling and energy prices remaining elevated, the Bank of England's tone on Thursday will be crucial in determining whether sterling can break out of its current consolidation range or extend its recent losses.
By RoboForex Analysis Department
Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
