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GBP/USD Rises as Dollar Weakens on Ceasefire Hopes
The pound rose for its best week in a month as dollar weakness on peace optimism overrode weak UK retail sales and business confidence. Next test: UK GDP. GBP/USD resistance near 1.2850; a break targets 1.2900, traders said.
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Sterling was headed for its strongest week in nearly a month on Friday, lifted by a weaker dollar as investors priced in growing prospects of a Middle East peace deal. The pound barely flinched after fresh data suggested the UK economy is starting to feel the strain from the Iran conflict. Retail sales missed forecasts. Business confidence edged lower. None of that moved cable.
The driver was the dollar. Iran-related headlines dominated price action all week. A potential ceasefire or diplomatic breakthrough would reduce the safe-haven bid that had lifted the greenback since the conflict escalated. Sterling, like most risk-sensitive currencies, snapped higher as those bets faded.
GBP/USD pushed through the 1.2800 handle midweek and held near those levels into Friday's close. Resistance sits around 1.2850, a level that capped rallies in late July. A break above that would put the pair in territory not tested since mid-March.
The resilience in sterling, even with soft domestic data and an uncertain political backdrop, underscores the dominance of external drivers. UK rate expectations have shifted little. The Bank of England is still seen on hold with the first cut priced in for late 2024. That leaves sterling's direction tied to the dollar's reaction to Middle East headlines.