• GBP/USD surged at the week's open on the US-Iran ceasefire and Strait of Hormuz reopening, then gave the entire move back to close flat.
• Soft US Empire State and Industrial Production data gave the Dollar every reason to soften, yet it held firm as traders position into Wednesday's FOMC.
• UK CPI on Wednesday and the BoE on Thursday are the Pound's domestic tests, but the Fed dominates the week.

GBP/USD opened the new week with a sharp risk-on pop toward 1.3450 as a US-Iran ceasefire and the reopening of the Strait of Hormuz sent Crude Oil tumbling and lifted risk-sensitive currencies. The entire move then unwound, leaving the pair back near 1.3400, almost exactly where it started. The relief was genuine but shallow, and a Dollar quietly bidding into Wednesday's Federal Reserve (Fed) meeting did the rest.

A ceasefire the market only half-believed

The deal that sparked the move is, on paper, a breakthrough, but the fine print invites skepticism. It is a preliminary framework: a 60-day ceasefire extension with Iran's nuclear program pushed into later talks and a formal signing not due until Friday. Crude Oil fell close to 5%, yet the broader risk reaction was only moderate, with most of the buying already done last week.

That is the problem for the Pound, which had no catalyst of its own on Monday and rode the global risk impulse higher. Once the relief was priced, the buy-the-rumor trade gave way to the sell-the-fact and Sterling drifted back to its starting point.

The Dollar isn't waiting for permission

Monday's US data gave the Dollar every reason to soften, yet it barely flinched. The New York Empire State Manufacturing Index collapsed to 5.7 in June from 19.6, well short of the 14 consensus, while Industrial Production rose a thin 0.1% in May against a 0.3% call. On most days that pressures the Dollar; two days before a Federal Open Market Committee (FOMC) decision, the market is not trading regional surveys.

The Fed is widely expected to hold its target range at 3.50% to 3.75% on Wednesday, but the tone should lean hawkish. May Nonfarm Payrolls (NFP) beat near 172K with unemployment steady around 4.3%, and rate futures now price the next move as a hike rather than a cut: a December hike sits better than even near 57%, and by January a hold drops to roughly 35%, making a hike the base case. That gives traders reason to trim short-Dollar positions into the event, and the Pound, lacking a domestic driver, gets carried along.

Coiled between the moving averages

On the daily chart the Pound is pinned in a tightening band, with Monday's close near 1.3400 sitting right on the 200-period Exponential Moving Average (EMA) at the handle and the 50-period EMA capping the tape just under 1.3450. The two have converged to within roughly 40 pips, textbook compression that precedes a volatility expansion, not its direction. The daily Stochastic Relative Strength Index (Stoch RSI) sits mid-range near 44, neutral and consistent with a holding pattern, leaving 1.3400 as the pivot the FOMC will decide.

Where the week is decided

Tuesday brings only US Building Permits and Housing Starts, near 1.42 and 1.43 million; second-tier housing data rarely moves a major pair before the Fed, so expect a quiet, position-squaring session.

Wednesday front-loads the Pound's domestic risk. UK Consumer Price Index (CPI) lands at 06:00 GMT, with headline inflation last at 2.8% YoY and the core rate seen ticking up toward 2.7% from 2.5%. It is the final reading still carrying the war's full energy premium, even as the ceasefire now points to a softer forward path.

US Retail Sales follow at 12:30 GMT, before the main event at 18:00 GMT: the Fed decision, projections and dot plot, with the press conference at 18:30 GMT. A hold is locked in, so the dots and the tone are the entire trade. Any upward drift in the projections extends the Dollar's bid and pressures GBP/USD; a softer message is the Pound's clearest route higher. The Bank of England (BoE) follows Thursday with its own hold expected.

Resistance: Near-term supply sits around 1.3450, the level that capped Monday's surge and aligns with the 50 EMA. A clean break and hold above it opens the 1.3500 handle, with little in the way until 1.3550.

Support: The 1.3400 handle is the immediate pivot, defended by the 200 EMA just beneath the close. A Fed-driven Dollar bid through it exposes 1.3350, then the lower edge of the recent range.

Bias: Mildly bearish into Wednesday. With no UK catalyst before the CPI release and the Dollar holding the upper hand on positioning, the path of least resistance is a grind toward 1.3400. Only a dovish Fed or soft dots flips that and puts 1.3450 and 1.3500 back in play.

GBP/USD daily chart