British Pound falls back from 1.34 as Iran tensions lift demand for USD

• Mounting geopolitical tensions push GBP/USD down 0.16% to 1.3372.
• A fall in US jobless claims to 194K underlines labour market resilience.
• With UK economic releases ahead, expectations of a November BoE rate rise hold firm.

Further evidence of US labour market strength has increased the likelihood of a Federal Reserve rate rise, though not in October. Against this backdrop and rising tensions in the Middle East, the Pound Sterling has slipped 0.16% against the US Dollar after reaching a high of 1.3419. GBP/USD is trading at 1.3372.

Sterling slips as geopolitical risks and robust US jobs figures overshadow BoE rate-rise expectations

Sterling and most other G7 currencies are under pressure from the intensifying US-Iran conflict. Iran’s IRGC Navy warned that it would strike US bases if the US encourages vessels to pass through the Strait of Hormuz. Reports of US and Israeli preparations for another round of strikes after the US midterm elections have also heightened investor concerns that the conflict could drag on further.

The reports lifted crude prices, taking West Texas Intermediate (WTI) up 0.69% to $98.29 per barrel. Notably, US Treasury yields are declining steeply as traders flee to the safety of US Treasuries in favour of stocks.

At 194K, US Initial Jobless Claims for the week ending 24 October came in below both the 200K forecast and the previous 199K reading, reaching a near 57-year low. A decline in the 4-week average to 197.75K also pointed to a low level of layoffs.

An October rate rise by the Federal Reserve is considered off the table, with the odds standing at 8%. For December, however, the probability is close to 80%, according to Prime Terminal.

Higher-than-expected UK inflation figures released during the week have strengthened expectations that the Bank of England will raise rates at its 5 November meeting. Attention now turns to Retail Sales and the S&P Global Flash PMIs, which could lend further support to the case for an increase.

Traders are also watching UK Finance Minister John Healey, whose first budget is expected on 28 October. Major investors anticipate that it will pass without causing undue market disruption.

GBP/USD Price Forecast: Resistance cluster limits recovery

Trading at 1.3379 on the daily chart, GBP/USD remains constrained below the key cluster of simple moving averages around 1.3407 and the nearby descending trend-line break at 1.3403. The Relative Strength Index (14), however, sits near 56, signalling an improvement in upward momentum despite the structural pressure. Any further recovery would therefore first need to test this narrow band of overhead resistance.

The descending trend line provides immediate resistance at 1.3403, reinforced by the simple moving average cluster around 1.3407. A sustained move above this area could clear a path towards higher trend-line resistance near 1.3624 and 1.3808. Initial support, meanwhile, lies around 1.3268, where the former descending resistance line now serves as a structural floor. A break beneath it would leave the pair vulnerable to a deeper decline within the broader range.

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