The British Pound extended its gains against the US Dollar on Tuesday, surpassing the 1.3600 mark. This was despite geoeconomic tensions and mixed signals from the Federal Reserve. US President Donald Trump warned about the recently proposed ceasefire between Israel and Iran.
But market sentiment remained optimistic, driving the GBP/USD up by over 0.65%. Federal Reserve Chair Jerome Powell said in prepared remarks that rate cuts could wait. The central bank is assessing the impact of tariffs on the economy.
Powell noted that tariffs are likely to increase prices and could have a lasting impact on economic activity. This stance contrasts with previous dovish comments from Fed Governors Christopher Waller and Michelle Bowman. Cleveland Fed’s Beth Hammack also indicated that rate cuts might be “on hold for quite some time.”
US housing data revealed a 2.7% increase in home prices from the previous year in April.
Meanwhile, UK economic data was light, with the CBI Industrial Trends Survey indicating a slight improvement in manufacturing output volumes.
Pound climbs amid geopolitical uncertainties
Bank of England Deputy Governor Dave Ramsden highlighted ongoing weaknesses in the UK labor market.
This influenced his decisions at the latest monetary policy meeting. Market participants are keenly anticipating more insights from Fed Chair Powell’s testimony at the US House of Representatives. They are also awaiting upcoming speeches from members of the Bank of England’s Monetary Policy Committee.
The GBP/USD remains upwardly biased after a brief dip towards the 50-day Simple Moving Average (SMA) at 1.3407. Since then, the pair has climbed steadily and appears poised to decisively break above the 1.3600 level. Momentum remains bullish, as indicated by the Relative Strength Index (RSI).
However, traders should remain cautious due to the potential for geopolitical risks to trigger market volatility. A pullback could see initial support at 1.3550. Further developments in the Israel-Iran conflict could significantly impact market dynamics.
This makes it crucial for traders to stay informed.
