The British pound was under modest pressure against the US dollar during Friday's Asian session, with the GBP/USD pair retreating to around the 1.3400 level.
Earlier, market optimism that the US and Iran were close to a final agreement briefly boosted global risk appetite, weakening demand for the safe-haven US dollar and propelling the GBP/USD pair higher by over 100 pips intraday.
However, this sentiment cooled after Iran indicated that a final decision on the deal had not yet been made, allowing the greenback to regain some footing following its earlier sharp pullback.
Key Issues Remain in US-Iran Talks
Several critical issues in the US-Iran negotiations remain unresolved, including arrangements for shipping through the Strait of Hormuz and frozen funds.
Furthermore, Iran's recent restrictions on oil tankers passing through the strategic waterway without coordination highlight continued regional uncertainty.
This lingering geopolitical risk has prevented a complete retreat in safe-haven demand, providing underlying support for the US dollar and capping further gains for the GBP/USD pair.
US Inflation Data Bolsters Fed Expectations
Meanwhile, the latest US inflation data has reinforced market expectations for the Federal Reserve to maintain a hawkish policy stance.
A strong US Producer Price Index reading for May has further solidified investor bets that the Fed could implement another interest rate hike later this year.
These higher rate expectations enhance the appeal of US dollar-denominated assets, adding additional downward pressure on the GBP/USD exchange rate.
Focus Shifts to UK Economic Data
Attention now turns to a series of key UK economic data releases, including the monthly Gross Domestic Product (GDP) report, which will provide fresh insights into the health of the British economy and guide the future policy path of the Bank of England.
Robust data could strengthen expectations for the Bank of England to maintain a tighter monetary policy, offering support for the pound.
Conversely, disappointing figures could intensify short-term selling pressure on the British currency.
Technical Outlook for GBP/USD
Despite the recent dollar-driven pullback, the GBP/USD pair is still on track for a notable weekly gain, reflecting underlying market confidence in the UK economic outlook and the Bank of England's policy stance.
The future direction of the currency pair will hinge on the final outcome of US-Iran talks, the Federal Reserve's interest rate trajectory, and the upcoming UK economic data.
From a daily chart perspective, the pair appears to be consolidating at elevated levels following its recent advance, maintaining an overall bullish bias.
However, a significant resistance zone between 1.3450 and 1.3500 is capping near-term upside momentum.
A decisive break above this zone could see the bulls target higher levels, while key support levels to watch on the downside are at 1.3350 and 1.3300.
A breach below these levels could trigger a deeper technical correction.
On the 4-hour chart, momentum has slowed after the sharp rebound, with price action entering a consolidation phase around short-term moving averages as the market awaits new fundamental catalysts.
A firm recovery above 1.3430 could see another attempt on the 1.3450-1.3500 resistance area.
A drop below the 1.3350 support level, however, could see bearish momentum extend towards the 1.3300 region.
Summary of Influencing Factors
In the near term, the GBP/USD pair's direction is influenced by a combination of Middle East geopolitical developments, US dollar safe-haven demand, and monetary policy expectations from both the Fed and the Bank of England.
The fluctuating prospects for a US-Iran deal have provided some support for the dollar after its recent decline, while persistent US inflation pressures have bolstered expectations for further Fed policy tightening.
In the immediate future, key UK data such as GDP will be a crucial driver for the pound.
Prior to the data release, the GBP/USD pair is likely to trade within a range between 1.3350 and 1.3500.
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