British Pound consolidates around mid-1.3300s vs USD; upside potential seems limited

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GBP/USD steadies following the previous day’s modest bounce from over a three-week low.
The end of Israel-Iran hostilities undermines the safe-haven USD and lends support to the pair.
Hawkish Fed bets limit USD losses, while UK political turmoil acts as a headwind for the GBP.

The GBP/USD pair struggles to capitalize on the previous day's modest bounce from the 1.3300 neighborhood, or over a three-week low, and seesaws between tepid gains/minor losses during the Asian session on Tuesday. Spot prices currently trade around mid-1.3300s amid a softer US Dollar (USD), though the fundamental backdrop warrants some caution before positioning for any meaningful appreciation.

Iran’s army announced on Monday that its attack on Israel was over, though it warned that further strikes on Lebanon would open the door for retaliation. Israeli Prime Minister Benjamin Netanyahu acknowledged the halt in fighting with Iran, but he vowed to respond with force to future attacks. This, in turn, drags the safe-haven USD further away from its highest level since late March, touched the previous day, and offers some support to the GBP/USD pair.

Meanwhile, the US and Iran remain at odds over key issues, including Tehran's nuclear program and the Strait of Hormuz. This keeps a lid on the market optimism, which, along with hawkish US Federal Reserve (Fed) expectations, should help limit deeper USD losses. In fact, traders are currently pricing in over a 70% chance that the US central bank will hike rates by the end of this year amid inflationary concerns, which favors the USD bulls and caps the GBP/USD pair.

Meanwhile, UK Prime Minister Keir Starmer's authority has been severely shaken following the resignations of junior ministers, fueling political uncertainty. This might hold back traders from placing aggressive bullish bets around the British Pound (GBP). Hence, it will be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has formed a near-term bottom, as the focus remains on the release of US inflation figures and the monthly UK GDP.

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.20%	-0.12%	-0.10%	0.07%	-0.42%	-0.51%	0.15%
EUR	0.20%		0.04%	0.20%	0.31%	-0.23%	-0.31%	0.35%
GBP	0.12%	-0.04%		0.09%	0.23%	-0.27%	-0.36%	0.30%
JPY	0.10%	-0.20%	-0.09%		0.12%	-0.35%	-0.48%	0.28%
CAD	-0.07%	-0.31%	-0.23%	-0.12%		-0.42%	-0.59%	0.08%
AUD	0.42%	0.23%	0.27%	0.35%	0.42%		-0.08%	0.58%
NZD	0.51%	0.31%	0.36%	0.48%	0.59%	0.08%		0.67%
CHF	-0.15%	-0.35%	-0.30%	-0.28%	-0.08%	-0.58%	-0.67%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).