British Pound holds steady above 1.3450 as Iran hopes and Fed repricing weigh on USD

The GBP/USD pair is seen consolidating its gains recorded over the past two days and trading around the 1.3470 region during the Asian session on Thursday. Nevertheless, spot prices remain confined within Monday's broader range as traders opt to wait for further developments surrounding the Middle East crisis before placing fresh directional bets.

Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, said that Iran and Oman are close to finalizing a proposed framework for commercial shipping through the Strait of Hormuz. Adding to this, hopes for progress towards a peace deal between the US and Iran keep the safe-haven US Dollar (USD) depressed near a seven-week trough, touched on Monday, which, in turn, is seen acting as a tailwind for the GBP/USD pair.

Meanwhile, crude oil prices languish near a three-week low amid optimism over a diplomatic resolution to end a five-month-old US-Iran war and the potential reopening of the Strait of Hormuz. This helps ease inflation fears and temper expectations for a rate hike by the US Federal Reserve (Fed), which turns out to be another factor weighing on the buck and backs the case for a further appreciating move for the GBP/USD pair.

Strategists at Scotiabank’s Global FX Strategy team observe that the Pound remains underpinned, noting that “a solid rise in Cable last week and bullish leaning (but still weak) trend oscillators suggest some upside potential for the pound, however.” This assessment aligns with their view that short-term technicals are neutral to mildly positive, with recent price action and momentum indicators continuing to hint at scope for further gains while nearby support levels help anchor sentiment.

However, Yemen’s Iran-backed Houthis said ‌that they had launched a missile attack on a Saudi oil tanker off the coast of the kingdom's Red Sea port city of Yanbu and another in the Gulf of Aden. This keeps geopolitical risk premium in play, which helps limit deeper USD losses and caps the upside for the GBP/USD pair. Traders also seem hesitant ahead of the release of the crucial US Nonfarm Payrolls (NFP) report on Friday.

In the meantime, Thursday's economic docket, featuring the UK Construction PMI and the usual Weekly Initial Jobless Claims data from the US, could provide some impetus. Furthermore, the incoming geopolitical headlines might continue to infuse some volatility across global financial markets and produce some trading opportunities around the GBP/USD pair. The fundamental backdrop, however, seems tilted in favor of bulls.