Insights 
VT 
The GBP/USD pair rose by 0.27% to 1.3600 after tensions escalated between Israel and Iran. This rebound comes after GBP/USD fell to 1.3515 on Friday due to regional hostilities, yet market sentiment improved by Monday, weakening the US Dollar.
The Dollar Index fell 0.27%, despite geopolitical tensions, as Treasury yields eased. This decline in the Dollar coincided with renewed risk appetite, providing upward momentum for the GBP/USD pair during the North American session.
Focus On Economic Data And Policy Meetings
Monday’s economic data was sparse, aside from a New York Fed Manufacturing Index that dropped to -16.0. Traders are focused on upcoming US Retail Sales figures, the Federal Reserve’s monetary policy meeting, and Fed Chair Jerome Powell’s speech.
In the UK, attention is on the Consumer Price Index figures and the Bank of England’s monetary policy decision. Market participants anticipate an 84.21% likelihood of unchanged rates at 4.25%, with a 25-basis-point cut expected by September.
The GBP/USD technical outlook remains positive, with resistance seen at 1.3631, 1.3650, and 1.37, while support levels are identified at the 20-day SMA of 1.3540, 1.3515, and 1.35. This week’s strongest currency performance was the British Pound against the Swiss Franc.
The earlier move higher in the GBP/USD pair—nudging up by 0.27% to reach 1.3600—came after a brief, sharp drop at the end of last week, when geopolitical developments in the Middle East weighed heavily on risk sentiment. What changed from Friday to Monday was not the events themselves, but how the market began to price in global risks. As tensions unfolded, investors initially sought safety in the US Dollar. But by the start of the new week, that caution gave way to a resumption of risk-seeking behaviour, allowing sterling to pick up again.
The Dollar Index’s slight decline, also by 0.27%, traced back largely to US Treasury yields falling. That retreat in yields has a direct impact on the greenback’s appeal, especially when other central banks aren’t signalling aggressive rate hikes or economic slowdowns. Lower yields tend to slash the return investors can expect from holding Dollar-denominated assets. When the expected reward falls, relative demand moves elsewhere. This has started to come into sharper focus as we approach several key data points and policy events, particularly for markets sensitive to relative yield differentials.
The lone US data point on Monday—the New York Fed’s Manufacturing Index—fell to -16.0, the kind of figure that tends not to move broad forex markets much on its own. But it aligns with the notion that the US economic engine may be running a touch slower now than it was earlier in the year. The focus now shifts to retail sales data and Powell’s upcoming comments, both of which could alter bets around the timing and pace of any future rate moves.
Market Positioning And Expected Moves
From our end, we’re watching the Bank of England more closely than usual. Inflation data due this week will likely give traders a fairly firm steer on how the Monetary Policy Committee might lean in the short term. Market bets—reflected in the current interest rate pricing—still lean toward no movement at 4.25% this week, although pricing suggests the first cut may surface sometime before autumn, possibly by September, if economic indicators soften further.
Technically speaking, the pair is testing notable resistance points, and price action around 1.3631 to 1.37 will be telling. Should these levels break convincingly, fast money could chase the move higher, especially with positioning still light following last week’s sell-off. On the flipside, initial support sits at the 20-day average of 1.3540. Below that, former lows at 1.3515 and 1.35 offer potential rest stops in the event of renewed selling.
Interestingly, the British Pound has quietly turned in its strongest performance of the week versus the Swiss Franc. This may appear secondary on the surface but offers a clearer indication of broad appetite for sterling exposure. Cross-asset relationships are often more revealing at moments when broader volatility surges.
For those active in derivatives, we’re approaching a stretch where market direction may pivot on event-driven data rather than on broader sentiment alone. This increases the need for disciplined positioning. Options pricing and implied volatilities ahead of central bank communications and inflation prints may provide quicker and more precise entry points than spot outright trades. Short-dated options in particular are worth monitoring given ongoing rate uncertainty.
In essence, it’s not just about watching the data, but how the market interprets it relative to current pricing. As we’ve seen, even amid geopolitical strain, FX can revert to movement driven by risk preferences and rate expectations—often in a matter of hours.
