GBP/USD in Sharp Focus as Middle East Tensions, Fed, BoE All Come Into Focus

Forex

Summary:

Geopolitical tensions and oil price spikes are driving USD strength, overshadowing Fed and BoE meetings. GBP/USD faces downside risks amid weak UK inflation data and technical breakdown below key support levels.

With both the Federal Reserve and Bank of England poised to deliver policy updates in the next 24 hours or so, one might expect central bankers to be the main attraction in markets. Not so. The real drama is unfolding on the geopolitical stage, where speculation is intensifying over a potential US military intervention in Iran.

Unsurprisingly, oil prices spiked once more yesterday, and with them, the US dollar found fresh safe-haven appeal. That put pressure on all major pairs, including the GBP/USD. This morning, though, oil prices eased slightly, paving the way for mild dollar selling. But the situation remains tense, keeping Brent oil steady near the $75 handle. For this reason, the risks for the GBP/USD remain tilted to the downside.

Before turning our focus to the central bank meetings, let’s take a look at the cable’s chart and discuss some levels that are coming into focus now.

GBP/USD Technical Analysis and Trade Ideas

The GBP/USD chart has now broken below the rising wedge pattern, which was always a prerequisite for downside momentum. The key question now is whether the cable will hold or break back below the pivotal level of 1.3430/35. This area was a major resistance zone in September 2024, before we finally broke above it in May this year.

Since then, rates have dipped back to test this level from above on a couple of occasions, including yesterday. The bulls have so far prevailed. However, a breakdown could trigger the unwinding of bullish bets and lead to some long-side liquidation. If that happens, the next support is seen around the 1.3400 area. Below that, the bullish trend line at 1.3450 will come into focus next.

Meanwhile, resistance is now seen in the range between 1.3515 to 1.3550 (shaded in orange on the chart). This area was the previous support and marks the underside of the broken short-term resistance trend. Above that, the recent high at 1.3632 will come into focus.

FOMC Rate Decision to Be Overshadowed by Middle East Tensions

As much as traders tune in for tonight’s Fed decision, it’s the chaos in the Middle East that’s truly driving sentiment. The dollar’s recent strength appears to be more a function of risk aversion than anything to do with Fed policy – the flight to safety being driven by crude prices lurching higher.

Israel’s renewed bombardment of Tehran has already ratcheted tensions, and talks of Washington’s involvement are adding fuel to the fire. Should those whispers become reality, we may well see oil extend its gains – and with it, the greenback.

Still, one must be cautious. The bounce in the US dollar index could easily be short-lived if oil’s ascent isn’t underpinned by genuine supply disruptions. Markets are running on headlines rather than fundamentals, and that makes for a fragile rally. Take yesterday’s tepid US retail sales figures – once the sort of print that would rattle FX markets, but now merely a sideshow. Geopolitics, it seems, has taken the wheel.

Turning back to the Fed, tonight’s decision will likely see rates left untouched, with the market laser-focused on the updated “dot plot” of rate projections.

I expect it to show policymakers still pencilling in 50 basis points of cuts this year. Oil’s resurgence, coupled with lingering concerns over tariff-led inflation, may convince the FOMC to strike a more hawkish tone. That alone could lend the dollar some staying power.

BoE Could Turn More Dovish

On the other side of the Atlantic, the pound faces its own challenges. UK CPI figures out this morning showed inflation slowing to 3.4% in May – a shade above expectations – while the core rate was in line at 3.5%, although still down from 3.8% the month before. More notably, services inflation slipped to 4.7%, undercutting forecasts. For a Bank of England that’s recently leaned hawkish, the data offer little support.

While a rate cut tomorrow remains highly unlikely, the pressure is clearly mounting for a more dovish stance. With economic indicators – from jobs to GDP – painting a softer picture, the BoE will struggle to maintain its tough talk unless inflation surprises to the upside again soon.

For GBP/USD, the next 24 hours promise plenty of volatility – but not necessarily clarity. Between central bank caution and headline-driven oil shocks, sterling’s upside is likely to remain subdued, with downside risks increasing.

Source: investing

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Adam

Cryptocurrency

Middle East Situation

Iran’s largest cryptocurrency exchange, Nobitex, was hacked for more than $90 million Wednesday, according to blockchain analytics firm Elliptic.

The funds were drained from platform wallets into addresses bearing anti-government messages explicitly referencing Iran’s Islamic Revolutionary Guard Corps, or IRGC, pointing to a politically motivated cyberattack, Elliptic said.

Pro-Israel hacking group Gonjeshke Darande, or “Predatory Sparrow,” claimed responsibility for the attack and said it would release the exchange’s source code. Elliptic said the exchange was offline at the time of its post.

Predatory Sparrow also claimed credit for a separate cyberattack on Iran’s state-owned Bank Sepah this week.

Fighting erupted between Israel and Iran on Friday and the countries have continued to trade missile fire. Iran supreme leader Ayatollah Ali Khamenei threatened the U.S. with “irreparable damage” Wednesday in response to President Donald Trump’s demand that the country surrender.

Though the stolen assets have not been conclusively attributed to the group, Elliptic noted that the funds were sent to cryptographic addresses the hackers likely cannot control — suggesting the money was intentionally destroyed as a symbolic act rather than stolen for profit.

Elliptic’s research linked the exchange to Iran’s IRGC, a powerful branch of the military designated as a terrorist organization by the United States, United Kingdom, European Union, and Canada.

Past investigations have connected the platform to sanctioned IRGC-linked ransomware operatives and individuals close to Khamenei.

Blockchain data also shows activity between the Nobitex exchange and wallets associated with Hamas, Palestinian Islamic Jihad, and the Houthis.

Elliptic said it’s continuing to monitor virtual asset flows tied to Iranian entities and has updated its compliance tools to reflect emerging threats in the region’s crypto ecosystem.

Source: cnbc

Risk Warnings and Disclaimers

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Thomas

Political

Iranian Supreme Leader Ayatollah Ali Khamenei rejected Donald Trump's demand for unconditional surrender on Wednesday, and the U.S. president said his patience had run out, though he gave no clue as to what his next step would be.

Speaking to reporters outside the White House, Trump declined to say whether he had made any decision on whether to join Israel's bombing campaign against Iran.

"I may do it. I may not do it. I mean, nobody knows what I'm going to do," he said.

Trump said Iranian officials had reached out about negotiations including a possible meeting at the White House but "it's very late to be talking," he said.

"Unconditional surrender, that means I've had it."

Asked for his response to Khamenei rejecting his demand to surrender, Trump said: "I say, good luck."

Iranians jammed the highways out of the capital Tehran, fleeing from intensified Israeli airstrikes.

In its latest bombing run, Israel said its air force had destroyed Iran's police headquarters.

"As we promised – we will continue to strike at symbols of governance and hit the ayatollah regime wherever it may be," Defence Minister Israel Katz said.

Khamenei, 86, rebuked Trump in a recorded speech played on television, his first appearance since Friday.

The Americans "should know that any U.S. military intervention will undoubtedly be accompanied by irreparable damage," he said.

"Intelligent people who know Iran, the Iranian nation and its history will never speak to this nation in threatening language because the Iranian nation will not surrender."

Trump has veered from proposing a swift diplomatic end to the five-day-old war to suggesting the United States might join it. In social media posts on Tuesday, he mused about killing Khamenei, then demanded Iran's "UNCONDITIONAL SURRENDER!"

A source familiar with internal discussions said Trump and his team were considering options that included joining Israel in strikes against Iranian nuclear installations. Defense Secretary Pete Hegseth told a Senate committee that the Pentagon was prepared to execute any order given by Trump

Iran's mission to the United Nations mocked Trump in posts on X: "Iran does NOT negotiate under duress, shall NOT accept peace under duress, and certainly NOT with a has-been warmonger clinging to relevance," it wrote.

"No Iranian official has ever asked to grovel at the gates of the White House," it said. "The only thing more despicable than his lies is his cowardly threat to 'take out' Iran’s Supreme Leader."

Israel's military said 50 Israeli jets struck around 20 targets in Tehran overnight, including sites producing raw materials, components and manufacturing systems for missiles. The military told Iranians to leave parts of the capital for their own safety while it struck targets.

Item 1 of 14 Smoke rises following an Israeli attack in Tehran, Iran, June 18, 2025. Majid Asgaripour/WANA (West Asia News Agency) via REUTERS

TRAFFIC BACKED UP

Traffic was backed up on highways leading out of the capital Tehran, a city of 10 million people, as residents sought sanctuary elsewhere.

Arezou, a 31-year-old Tehran resident, told Reuters by phone that she had made it out to the nearby resort town of Lavasan.

"We will stay here as long as this war continues. My friend’s house in Tehran was attacked and her brother was injured. They are civilians," she said. "Why are we paying the price for the regime’s decision to pursue a nuclear programme?”

In Israel, sirens rang out warning people of retaliatory Iranian missile strikes. At Ramat Gan city train station east of Tel Aviv, people were lying on city-supplied mattresses lined along the floor or sitting in the odd camping chair, with plastic water bottles strewn about.

"I feel scared, overwhelmed. Especially because I live in a densely populated area that Iran seems to be targeting, and our city has very old buildings, without shelters and safe spaces," said Tamar Weiss, clutching her four-month-old daughter.

Iran has been exploring options for leverage, including veiled threats to hit the global oil market by restricting access to the Gulf through the Strait of Hormuz, the world's most important shipping artery for oil.

Oil prices leapt 9% on Friday and have marched further higher this week. The CEO of Italian energy company Eni (ENI.MI), opens new tab said the rises so far were still limited, signaling an expectation that serious disruption would be averted.

A former Iranian economy minister, Ehsan Khandouzi, said on X that Iran should start demanding tankers obtain permission to transit the strait. Iran's Oil Ministry and Foreign Ministry did not immediately respond to requests for comment.

BAN ON FILMING

Inside Iran, authorities are intent on preventing panic and shortages. Fewer images of destruction have been allowed to circulate than in the early days of the bombing, when state media showed pictures of explosions, fires and flattened apartments. A ban on filming by the public has been imposed.

The state has placed limits on how much fuel can be purchased. Oil Minister Mohsen Paknejad told state TV that restrictions were in place to prevent shortages, but there would be no problem supplying fuel to the public.

Iranian officials have reported at least 224 deaths in Israeli attacks, mostly civilians, though that toll has not been updated for days.

In Israel, Iran's missile volleys mark the first time in decades of shadow war and proxy conflict that a significant number of projectiles fired from Iran have penetrated defences, killing Israelis in their homes.

Since Friday, Iran has fired around 400 missiles at Israel, some 40 of which have pierced through air defences, killing 24 people, all of them civilians, according to Israeli authorities.

With Khamenei's main military and security advisers killed, the leader's inner circle has been narrowed, raising the risk that he could make strategic errors, according to five people familiar with his decision-making process.

During the Gaza war, Israel has dealt heavy blows to Iran's regional allies Hamas and Hezbollah, limiting Tehran's ability to retaliate through strikes by its proxy fighters close to Israeli borders. Syrian leader Bashar al-Assad, propped up by Iran through 13 years of war, was toppled last year.

Source: Reuters

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Warren Takunda

Economic

Inflation in the UK eased slightly to 3.4% last month as a steep fall in air fares and petrol prices was offset by a jump in the cost of food.

May’s decline in the consumer prices index (CPI), down from the official figure of 3.5% for April, complicates the Bank of England’s interest rates decision on Thursday, although policymakers are still almost certain to hold interest rates at 4.25%.

Annual food inflation jumped to 4.4% in May from 3.4% in April, spurred by increases in the cost of sugar, jam and chocolate, which rose at the fastest pace since records began in 2016. Poor harvests affecting major cocoa-producers in Ghana and Ivory Coast sent chocolate prices soaring 17.7%.

Ruth Gregory, the deputy chief UK economist at Capital Economics, said rising food prices would be a concern to the Bank, especially when some staples such as meat were also pushed higher.

“The third consecutive rise in food price inflation to 4.4%, its highest since February 2024, will be a bit of a blow for the Bank as it perhaps provides a tentative sign that firms are passing on more of April’s rise in national insurance contributions in their selling prices.”

As well as food getting more expensive, furniture and household items also went up, increasing the rate of inflation for goods in shops from 1.7% in April to 2% last month, despite the cost of clothing and footwear declining by 0.3% over the past year. UK Inflation Eases Slightly to 3.4% as Food Price Rises Offset Transport Cost Falls_1

UK Inflation Eases Slightly to 3.4% as Food Price Rises Offset Transport Cost Falls_1

The Office for National Statistics said its measure of core inflation, which excludes volatile items such as energy, food and alcohol, rose by 3.5% in the last year, down from 3.8%.

City economists had correctly predicted last month’s fall in CPI to 3.4%, which was largely owing to falls in the price of petrol and diesel, which brought down transport costs. The Bank’s target for the measure is 2% and May’s reading is likely to leave policymakers circumspect about accelerating the pace of interest rate cuts.

The ONS said earlier this month that it had overestimated its CPI reading for April by about 0.1 percentage points because of an error that meant the effect of higher car tax bills was exaggerated. It left the original reading in place as the official figure for that month, but said it would use the correctly weighted data in future calculations.

Air fares tumbled in May from an increase of 16.2% in April to -3.9% in May, although this was largely because Easter – when airlines traditionally raise fares – fell a month later this year, in April rather than March.

Services inflation, which has remained high over recent years, began to slow more rapidly, down from 5.4% to 4.7%. The Bank has resisted making steep cuts to interest rates while services inflation has remained sticky.

Pressure has increased on the central bank to cut the cost of borrowing, after recent data showed the economy has slowed. Wages growth fell and unemployment increased in the February-to-April quarter, while the economy shrank in April.

Monica George Michail, an associate economist at the National Institute of Economic and Social Research, said inflation was likely to remain above 3% for the rest of the year amid persistent wage growth and the inflationary effects from higher government spending.

“Additionally, the current tensions in the Middle East are causing greater economic uncertainty. We therefore expect the Bank of England to keep rates on hold this Thursday and implement just one further cut this year,” she said.

The chancellor, Rachel Reeves, said there was “more to do” to bring down inflation and support households hit by the high cost of living. She is keen for the Bank to accelerate the pace of interest rate cuts to ease monthly mortgage costs and reduce the cost of borrowing for businesses.

Financial markets still expect two rate cuts to 3.75% by the end of this year and several more next year as inflation is expected to drift back to 2%, although the Bank has been reticent to indicate where interest rates may settle.

Reeves said: “We took the necessary choices to stabilise the public finances and get inflation under control after the double-digit increases we saw under the previous government, but we know there’s more to do.

“Last week we extended the £3 bus fare cap, funded free school meals for over half a million more children and are delivering our plans for free breakfast clubs for every child in the country.”

The shadow chancellor, Mel Stride, blamed Labour for inflation remaining above the Bank’s target. “Labour’s choices to tax jobs and ramp up borrowing are killing growth and stoking inflation, making everyday essentials more expensive,” he said.

Source: Theguardian

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Adam

Economic

Central Bank

With the Federal Reserve just hours away from its latest decision on interest rates, President Donald Trump on Wednesday lambasted Chair Jerome Powell, calling him “stupid” while he doubted the central bank would cut.

In his latest in a series of attacks on Powell that go back years, Trump said the Fed’s key borrowing rate should be at least 2 percentage points lower.

“So we have a stupid person. Frankly, you probably won’t cut today,” Trump said in impromptu remarks just outside the White House. “Europe had 10 cuts, and we had none. And I guess he’s a political guy, I don’t know. He’s a political guy who’s not a smart person, but he’s costing the country a fortune.”

The remarks came just about four hours before the rate-setting Federal Open Market Committee was to release its statement on interest rates, along with an update of where it sees policy and several key economic metrics heading over the next several years.

Market pricing indicates no probability of cut at this meeting, with the next move expected in September. The Fed currently targets its overnight borrowing rate in a range between 4.25%-4.5%.

Powell had his colleagues have expressed hesitation about adjusting rates with so many unanswered questions regarding the economy.

For one, the longer-term impact of Trump’s tariffs is not known. Inflation indicators are little changed since the tariffs were implemented in April, but various factors have colluded to keep the impact from the duties at bay.

Trump, though, said the higher rates are costing the U.S. “hundreds of billions” in financing costs that could be saved if the Fed would ease.

“If he’s worried about inflation, that’s OK. I understand that. I don’t think there’s going to be any. So far there hasn’t,” Trump said.

“But now we have a man that just refuses to lower the Fed rate, just refuses to do and he’s not a smart person,” the president added. “I don’t even think he’s that political. I think he hates me, but that’s OK.”

Trump and Powell recently met at the White House, though little has been disclosed about what was discussed. Powell and his colleagues have vowed they will not be swayed by political pressure, which has ramped up to include other administration officials including Vice President JD Vance.

Trump even mused about appointing himself as Fed chair, saying, “I’d do a much better job than these people.”

Powell’s term expires in May 2026, and Trump has said he intends to name a successor soon.

source :cnbc

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Olivia Brooks

Economic

Commodity

Stocks

Wall Street indexes posted modest gains and oil prices dipped on Wednesday as investors weighed the impacts of a Middle East conflict and a U.S. rate decision on a global economy already grappling with uncertainty stemming from U.S. economic policy.

Brent crude oil prices initially extended their recent rise as the Israel-Iran air war entered its sixth day, feeding concerns over global oil supply, before falling 1.52% to $75.31 per barrel after U.S. President Donald Trump said Iran wanted to negotiate.

Stock buyers made cautious inroads in early trading on Wall Street, giving a 0.50% push to both the Dow Jones Industrial Average and the S&P 500 (.SPX), and a 0.56% boost to the Nasdaq Composite (.IXIC).

While geopolitics were the biggest immediate concern, other lingering doubts included a squabble over President Trump's tax bill, said Chris Maxey, Managing Director and Chief Market Strategist at New York-based Wealthspire.

"Uncertainty began at the start of the year, and it felt like it just kept growing ... It's uncertain about what's coming next with respect to the (U.S.) tax package, what's going to happen with the Federal Reserve, what's going to happen in the Middle East," he said.

"People are trying to digest all of this information without a huge amount of clarity," Maxey added.

Trump declined to answer questions on whether the U.S. was planning to strike Iran or its nuclear facilities, saying: "Nobody knows what I am going to do."

Watch the Fed for clues

The Fed is expected to keep its main funds rate steady on Wednesday in the 4.25%-4.50% range it has held since December. It is expected to issue projections, known as a dot plot, that signal it will not move decisively for months to come.

Signs of fragility in the U.S. economy make for a challenging backdrop.

U.S. retail sales fell by a larger-than-expected 0.9% in May, data showed on Tuesday, the biggest drop in four months, while labour market indicators are showing weakness.

"Markets are going to be closely watching the Fed's quarterly dot plot for clues on how and when the central bank will resume its cutting cycle," Insight Investment co-head of global rates Harvey Bradley said.

"As tensions in the Middle East have the potential to threaten the inflation picture further, it cannot be ruled out that projections adjust to reflect just one rate cut this year,” he added.

U.S. Treasury yields fell again on Wednesday, continuing a slide on Tuesday prompted by investors calculating that geopolitical risks abroad were greater than the chances the U.S. debt pile becomes unmanageable.

The benchmark 10-year note was last yielding 2.6 basis points less, at 4.365%, from 4.391% late on Tuesday.

The two-year yield, which is more sensitive to changes in expectations for Fed interest rates, fell 1.1 basis points to 3.939%, from 3.95% late on Tuesday.

Source: Kitco

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Adam

Commodity

Gold prices are a bit lower and silver prices a bit higher in quieter early U.S. trading Wednesday. The marketplace awaits the Fed’s FOMC meeting that ends Wednesday afternoon with a statement and press conference from Fed Chair Powell. The Fed is not expected to cut interest rates. However, traders will closely scrutinize the FOMC statement and Fed Chair Powell’s comments in his press conference this afternoon. August gold was last down $4.70 at $3,402.20. July silver prices hit a 13-year high overnight and were last up $0.059 at $37.21.

Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to slightly higher openings today in New York. Risk aversion remains elevated at mid-week. Reports are saying President Trump is mulling striking Iranian nuclear sites with huge “bunker-buster” bombs, which many military analysts believe is necessary to set back Iran’s nuclear program for several years.

Writes David Morrison of Trade Nation in a morning email dispatch: Despite the Israel-Iran military conflict that may bring in the U.S., “there has been no sense of panic from investors. Of course, as far as the U.S. is concerned, events are taking place a long way from home…. But there’s also a feeling that investors are betting on a short and sharp engagement, resulting in a more stable position across the Middle East than the one that currently exists. Perhaps that’s a matter of considering recent history. But if so, that’s quite an optimistic outlook. And the question must be: Does that factor in US military engagement or not?”

The key outside markets today see the U.S. dollar index slightly down. Nymex crude oil futures prices are slightly higher and trading around $75.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.379%.

Other U.S. economic data due for release Wednesday the weekly MBA mortgage applications survey, new residential construction, the weekly jobless claims report, the weekly DOE liquid energy stocks report and Treasury international capital data.

Gold price slightly down ahead of FOMC results_1

Technically, August gold futures bulls have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,500.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the June low of $3,313.10. First resistance is seen at $3,427.70 and then at $3,450.00. First support is seen at this week’s low of $3,384.40 and then at $3,358.50. Wyckoff's Market Rating: 8.0.

Gold price slightly down ahead of FOMC results_2

July silver futures bulls have the solid overall near-term technical advantage and gained more power today. Prices are trending higher on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $40.00. The next downside price objective for the bears is closing prices below solid support at $35.00. First resistance is seen at $37.50 and then at $38.00. Next support is seen at $37.00 and then at $36.50. Wyckoff's Market Rating: 8.5.