British Pound softens to near 1.3550 on geopolitical tensions, hawkish Fed bets

The GBP/USD pair trades with mild losses around 1.3550 during the early Asian trading hours on Tuesday. The US Dollar (USD) edges higher against the British Pound (GBP) amid ongoing Middle East tensions and Federal Reserve (Fed) Chair Kevin Warsh's hawkish remarks at the Jackson Hole symposium.

US President Donald Trump on Monday threatened to forcefully strike Iran after the US and Iran exchanged fire for the first time in a month. Meanwhile, Iran's Revolutionary Guard Corps (IRGC) said it targeted US military bases in the two Middle Eastern countries in response to the first US strikes on Iran in weeks. 

Late Monday, the United Kingdom Maritime Trade Operations (UKMTO) said that a tanker ‌has reported being ‌struck by three projectiles while sailing out ‌of the ‌Strait of Hormuz, per Reuters. Rising tensions in the Middle East could boost safe-haven flows, supporting the Greenback and acting as a headwind for the major pair. 

Fed Chairman warned on Friday that inflation is not slowing significantly, and that unless policymakers become confident it is, the central bank has “work to do.” Traders raise their bets on a September rate hike following Warsh’s speech. 

Traders brace for the US ISM Manufacturing Purchasing Managers Index (PMI) report, which will be released later on Tuesday. On Friday, the attention will shift to the employment data for August. In case of a weaker-than-expected outcome, this could drag the USD lower in the near term. 

BoE expectations firm as markets eye UK budget for next policy cues

Strategists at Scotiabank highlight that market pricing remains firmly tilted toward further BoE tightening, with investors assigning “a ~60% chance of a 25bpt at the next BoE meeting on September 16” and “a cumulative 36bpts of tightening by year-end.” They add that, in terms of sentiment, “the October 28 budget… will remain a key focus for markets over the next coupld of months,” underscoring the extent to which fiscal signals are now seen as integral to the UK policy outlook.

Technical Analysis: GBP/USD

In the daily chart, GBP/USD trades at 1.3546. The pair holds a mild bullish bias, with price above the 100-day simple moving average (SMA) at 1.3444 and the lower Bollinger Band at 1.3433, suggesting underlying demand on dips. However, spot is pressing against the Bollinger middle band at 1.3550, which acts as a nearby cap, while the Relative Strength Index (RSI) at 53.3 points to steady but not overstretched upside momentum.

On the topside, initial resistance is aligned at the Bollinger 20-period SMA near 1.3550, followed by the upper Bollinger Band around 1.3668. On the downside, support emerges first at the 100-day SMA at 1.3444, before the lower Bollinger Band at 1.3433, where buyers would be expected to reappear if a corrective pullback unfolds.