• US-Iran hostilities lift Oil, boosting Dollar and Treasury yields.
• June CPI data could reset Fed tightening expectations.
• Burnham cabinet uncertainty keeps Sterling exposed to fiscal-risk premium.

The Pound Sterling begins the week on a lower note, as over-the-weekend developments in the Middle East fueled inflationary pressures due to the rise in Oil prices. At the time of writing, the GBP/USD trades at 1.3369, down over 0.20%.

GBP/USD slips as Middle East attacks revive inflationary pressure

The constant exchange of attacks between the US and Iran triggered a flight to safe-haven assets, bolstering the Greenback. The US Dollar Index (DXY), which tracks the buck against a basket of six currencies, is up 0.18% at 101.14.

In addition, US Treasury yields are rising, as high energy prices are increasing the likelihood of higher US interest rates. Traders had fully priced in a 33-basis-point increase towards the end of the year, according to Prime Terminal data.

Meanwhile, the US economic docket is absent on Monday, as traders await the release of the Consumer Price Index (CPI) data for June on July 14. Economists estimate that headline CPI would dip -0.1% MoM, down from a 0.5% increase, while core CPI is projected to remain unchanged at 0.2% MoM.

In the UK, the docket was absent, though last week the Bank of England (BoE) Chief Economist 

Huw Pill said that interest rates need to rise in the year ahead, he said on an interview with the BBC. Money markets had priced in 33 basis points of BoE tightening by the end of 2026.

In the meantime, uncertainty about the cabinet of the incoming Prime Minister, Andy Burnham, could be a headwind for Sterling. Although he and his team pledged to current Chancellor Rachel Reeves fiscal rules, a sudden shift could send UK Gilts soaring if the markets demand a a higher risk premium, if fiscal spending grows.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3379, retaining a capped tone as it holds below the latest simple moving average from the triple set at 1.3391 while remaining under the broader downwards resistance trend line anchored by a break level near 1.3498. The mildly positive Relative Strength Index (14) around 54 hints that downside pressure is not aggressive, yet the pair still trades beneath these key reference levels, suggesting rallies are vulnerable while those resistances remain intact.

On the topside, immediate resistance is seen at the simple moving average from the triple cluster around 1.3391, with the downwards resistance trend line’s break area near 1.3498 acting as a stronger cap if buyers extend a bounce. On the downside, structural support is derived from the broader upwards support trend line rooted near 1.3159, where a break would expose a deeper bearish extension, while holding above this floor would keep the pair in a wider consolidative phase despite the current overhead barriers.

(The technical analysis of this story was written with the help of an AI tool. Know more.)