Pound Faces Fresh Pressure From Dollar Strength

Key Takeaways

-GBP/USD slipped as renewed US dollar demand capped sterling’s recovery.
-Safe-haven flows returned after US-Iran tensions raised concerns over oil and inflation risks.
-The Bank of England’s cautious stance helped limit deeper losses for the pound.
-Sterling needs a stronger break above near-term resistance before buyers can regain control.
-Fed expectations, oil prices, and BoE guidance remain the main drivers for GBP/USD.

GBP/USD came under pressure on Monday as fresh demand for the US dollar limited sterling’s rebound. The pair recovered briefly from the 1.3550 to 1.3545 support zone, but buyers lacked enough momentum to push the move higher.

The market still appears willing to buy the pound on dips, but traders are not ready to chase a stronger breakout yet. With US jobs data reinforcing a hawkish Fed outlook and geopolitical risks lifting safe-haven demand, the dollar remains the stronger driver for now.

Iran Risk Keeps the Dollar Supported

US-Iran tensions have returned as a key market focus after optimism over a possible nuclear deal faded. Renewed concerns around the Strait of Hormuz pushed traders back toward defensive positioning, supporting the US dollar.

Brent crude also climbed to $105.85 per barrel as energy supply risks stayed active. This matters for GBP/USD because higher oil prices can add inflation pressure, making it harder for the Fed to shift toward rate cuts.

Bank of England Signal Limits Sterling Losses

Sterling avoided a sharper decline because the Bank of England remains cautious on inflation. The BoE held Bank Rate at 3.75%, while inflation remains above its 2% target, keeping tighter policy options on the table.

This gives the pound some support. If UK inflation stays persistent, the BoE may need to keep rates elevated for longer, which could help sterling hold key support levels even as the dollar strengthens.

UK Politics Eases Some Pressure

Reduced concern over Prime Minister Keir Starmer’s political position also helped limit downside pressure on the pound. Political stability can support sterling by lowering uncertainty around fiscal policy, investment confidence, and future reforms.

Still, domestic politics is not the main driver in this session. The bigger force remains the dollar, especially as traders focus on Fed expectations, safe-haven demand, and oil-linked inflation risks.