British Pound consolidates around 1.3500 vs USD; looks to US CPI, UK GDP for fresh impetus

• GBP/USD struggles to capitalize on the overnight breakout above the 1.3500 psychological mark.
• Geopolitical risks, inflation fears, and Fed hike bets underpin the USD, capping gains for the pair.
• Traders also seem reluctant ahead of key US inflation figures and the prelim UK Q2 GDP report.

The GBP/USD pair seesaws between tepid gains and minor losses through the early European session on Tuesday, though it remains close to the highest level since July 16 set the previous day. Spot prices currently trade around the 1.3500 psychological mark, nearly unchanged for the day, as traders opt to wait for this week's important macro releases from the US and the UK.

The crucial US Consumer Price Index (CPI) report will be released on Wednesday, followed by the preliminary UK Q2 GDP figures on Thursday and the US Producer Price Index (PPI). In the meantime, the US-Iran standoff, along with bets that the US Federal Reserve (Fed) will adopt a more hawkish stance amid inflation risks stemming from volatile oil prices, supports the safe-haven US Dollar (USD) and caps GBP/USD.

In fact, Iran ruled out any future negotiations with US President Donald Trump and said that it will wait until his term ends on January 20, 2029, to resume talks. This dampens hopes for a swift reopening of the Strait of Hormuz. Furthermore, shipping traffic through the Bab el-Mandeb Strait remains choked due to the Iran-backed Houthis' naval blockade against Saudi Arabia. The latest developments pushed crude oil prices to a one-and-a-half-week high.

Meanwhile, traders are still pricing in a greater chance that the US central bank will raise borrowing costs at least once by the end of this year. The outlook remains supportive of elevated US Treasury bond yields and favors USD bulls. Moreover, the lack of follow-through buying following a breakout above the 1.3500 mark warrants caution before positioning for any further near-term appreciation for the GBP/USD pair.

GBP/USD 4-hour chart

Technical Analysis

On the downside, immediate support is seen at the 100-period Simple Moving Average (SMA) at 1.3408, where a break would weaken the bullish tone and expose deeper retracements. Above the said area, the the GBP/USD pair would likely stay bid and aim to test the July monthly swing high, around the 1.3555-1.3560 region.

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