British Pound holds just below 1.3400 near 16 September highs against subdued USD

• A combination of supportive factors keeps GBP/USD holding on to its recent sizeable gains.
• Lower US bond yields weigh on the USD, as expectations of a BoE rate rise underpin the GBP.
• Further USD weakness could be contained by geopolitical risks and a hawkish Fed, potentially restraining gains in the pair.

Just below 1.3400, GBP/USD is consolidating its gains in Thursday’s Asian session, close to the highest level since 16 September reached earlier this week. With the fundamental backdrop appearing to favour buyers, the uptrend established a week ago looks to have scope to extend.

September’s rise in UK consumer price inflation to an 11-month high has reinforced expectations that the Bank of England (BoE) will raise interest rates in November, lending support to the British Pound (GBP). By contrast, declining US bond yields have left the US Dollar (USD) struggling to draw meaningful buying interest, with the currency hovering near Tuesday’s almost three-week low. Together, these factors provide support for GBP/USD and reinforce the favourable outlook.

The prospect of a further escalation in Middle East tensions continues to sustain the geopolitical risk premium. Iran's Foreign Minister Abbas Araghchi said Tehran was willing to give diplomacy another chance, provided it saw strong evidence that the US sincerely wanted to reach a just solution. In a separate report, The New York Times said the US and Israel had prepared plans for a possible fresh round of strikes on Iran following the US midterm elections.

By supporting crude oil prices, these risks add to inflation concerns and reinforce expectations of an imminent Federal Reserve (Fed) rate rise. CME Group's FedWatch Tool indicates that traders currently assign around a 90% probability to an increase in US borrowing costs in December. The resulting support for the safe-haven US dollar helps contain its losses, discouraging traders from adding bullish GBP/USD positions or positioning for further advances.

GBP/USD consolidates on the daily chart

GBP/USD Holds Above the 100-Day SMA

Trading just above its 100-day Simple Moving Average (SMA), GBP/USD retains a broadly neutral near-term bias, although a tentative base appears to be forming above this dynamic support. The pair remains confined between immediate resistance at the 50.0% Fibonacci retracement of 1.3404 and the lower 38.2% retracement at 1.3341. This points to continued consolidation while traders wait for a more decisive directional break.

Beyond immediate resistance, the next barriers lie at the 61.8% retracement near 1.3467 and the 78.6% level at 1.3557, followed by the swing high area at 1.3672. Initial support comes from the 100-day SMA at 1.3389, ahead of the 38.2% retracement at 1.3341. Should that level give way, the 23.6% retracement around 1.3263 would come into view, while the structural low near 1.3137 offers a more distant support level.

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