• GBP/USD attracts some dip-buyers following a weekly bearish gap opening.
• Hopes for further diplomacy cap the USD gains and lend support to the pair.
• Economic concerns due to the Iran war could act as a headwind for the GBP.

The GBP/USD pair opens with a bearish gap at the start of a new week and, for now, seems to have snapped a five-day winning streak to its highest level since late February, around the 1.3485 region set last week. Spot prices, however, rebounded a few pips from the Asian session low and currently trade around the 1.3400 round figure, still down nearly 0.45% for the day.

The global risk sentiment takes a turn for the worse in reaction to failed US-Iran peace talks over the weekend and benefits the US Dollar's (USD) reserve currency status, which, in turn, is seen weighing on the GBP/USD pair. In fact, high-level negotiations ended without a breakthrough despite nearly 21 hours of intense discussions. Adding to this, US President Donald Trump said that the US Navy would start blockading the Strait of Hormuz, raising the risk of a re-escalation of tensions in the Middle East and jeopardizing a fragile two-week ceasefire.

Meanwhile, the latest geopolitical developments trigger a sharp intraday rally in Crude Oil prices, fueling inflationary concerns. This follows Friday's data, showing that the US inflation surged by the most in nearly four years during March, and forces investors to abandon bets on Fed rate cuts and shift focus to potential interest rate hikes this year. The outlook, in turn, leads to a fresh leg up in US Treasury bond yields and lends additional support to the Greenback. However, hawkish Bank of England (BoE) expectations limit losses for the GBP/USD pair.

The BoE signal about a potential interest rate hike as early as April raises downside risks to the economy, which remains highly vulnerable to energy price shocks linked to the Iran war. 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 positioning for the resumption of the GBP/USD pair's recent goodish recovery move from the vicinity of mid-1.3100s, or the year-to-date high, touched on March 31.