The British pound held near 1.3400 against the US dollar in Asian trade on Thursday, as renewed violence in Lebanon and stalled ceasefire efforts between the United States and Iran kept geopolitical tensions elevated and supported demand for safe-haven assets.
Middle East tensions weigh on risk sentiment
Comments from Iran’s parliamentary speaker, Mohammad Bagher Qalibaf, reignited regional concerns after he said Washington had violated three elements of a 10-point ceasefire proposal. His statement cast doubt on the viability of further talks and undermined earlier signs of diplomatic progress.
The remarks triggered a fresh bout of risk aversion, pressuring assets tied to global growth and sentiment. Traders turned cautious amid fears that any escalation in the Middle East could disrupt broader markets and energy supplies.
Dollar gains as safe-haven bid builds
Reflecting the shift into safer holdings, the US Dollar Index edged up toward 99.05, supported by renewed demand for the greenback. US equity futures softened, with S&P 500 contracts slipping about 0.2% to around 6,770, signaling a weaker risk appetite at the start of the trading day.
The risk-off tone was also evident in US government bonds. The 10-year Treasury yield fell three basis points to 4.88% overnight, as increased buying pushed yields lower and underscored a preference for capital preservation over risk-taking.
Focus turns to key US inflation release
Attention is now firmly on Friday’s US March Consumer Price Index, which is expected to be the main scheduled driver for markets.
Consensus forecasts point to:
- headline CPI: 3.3% year-on-year (vs 2.4% in February)
- core CPI (excluding food and energy): 3.1% year-on-year (vs 2.8% in February)
A stronger-than-expected reading could reinforce the case for keeping US interest rates higher for longer, while a downside surprise might revive speculation about earlier policy easing.
Fed expectations repriced sharply
Recent data have already led to a rapid repricing of Federal Reserve expectations. Market-implied odds of a rate cut by mid-year have dropped below 15%, compared with about 55% just a month ago, according to federal funds futures pricing.
This shift has helped underpin the dollar and complicated the outlook for currencies such as the pound, which remain sensitive to changing relative rate expectations.
Technical view: pound supported above key moving average
From a technical standpoint, GBP/USD is consolidating but maintains a constructive bias as long as it trades above its 20-day exponential moving average (EMA), currently near 1.3325. That level is acting as immediate support and a short-term floor.
Key levels:
- support 1: 1.3325 (20-day EMA)
- support 2: 1.3200 (psychological level and early-March congestion)
- momentum: 14-day relative strength index around 54, indicating mild upward momentum
A sustained break below 1.3325, particularly on the back of a stronger US inflation print, could open the way toward the 1.3200 area. Holding above the EMA would keep the near-term bias tilted upward, with prior swing highs likely to serve as reference points for resistance, although specific levels were not cited in the available data.
Trading environment dominated by event risk
With both geopolitical and macroeconomic risks elevated, markets are in a holding pattern ahead of Friday’s 8:30 a.m. Eastern Time CPI release. Short-term positioning around that event carries binary-style risk: an upside or downside inflation surprise could invalidate existing technical setups and trigger sharp moves in currency, equity, and bond markets.
For many, allowing the initial reaction to unfold before committing new capital may offer clearer direction and reduce the chance of being caught on the wrong side of a sudden repricing.
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