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Published: 20 July 2026,10:47
Daily Market Analysis New
*GBP/USD remained under pressure as escalating Middle East tensions increased safe-haven demand for the US dollar.
*Rising oil prices heightened concerns that higher energy costs could reignite UK inflation, complicating the Bank of England’s policy outlook.
*Political optimism in the UK following Andy Burnham’s appointment as Prime Minister and expectations of a fiscally conservative Chancellor provided limited support but was overshadowed by the stronger US dollar.
The British pound remained under pressure against the US dollar, with GBP/USD hovering around the 1.3450 level as investors continued to favour the greenback amid escalating geopolitical tensions in the Middle East. Safe-haven demand strengthened after the United States confirmed additional casualties from Iranian attacks in Iraq and Jordan, while both sides expanded military operations beyond military facilities to include infrastructure and port assets. The growing risk of a prolonged regional conflict has boosted demand for the US dollar while reducing appetite for risk-sensitive currencies, including sterling.
Rising crude oil prices have added another layer of pressure on the pound by increasing concerns that higher energy costs could reignite UK inflation. As the UK remains relatively exposed to imported energy prices, the latest rally in oil following renewed threats to the Strait of Hormuz has complicated the Bank of England’s policy outlook. Although recent UK inflation has eased, markets remain concerned that persistently elevated energy prices could slow the disinflation process and force the BoE to maintain higher interest rates for longer, while weaker economic growth continues to limit the central bank’s flexibility.
Political developments also remained in focus after Andy Burnham officially became the UK’s new Prime Minister, replacing Keir Starmer following Labour’s leadership transition. Investors welcomed expectations that Shabana Mahmood could become Chancellor, viewing her as a more fiscally conservative choice that may improve confidence in the UK’s public finances. Nevertheless, the positive political sentiment was largely overshadowed by the stronger US dollar and global risk-off mood, preventing sterling from sustaining last week’s gains despite the UK’s return to modest economic growth.
Looking ahead, traders will closely monitor this week’s UK employment report, inflation data and retail sales figures for further clues on the Bank of England’s policy path. At the same time, softer-than-expected US CPI and PPI data have reduced expectations of an immediate Federal Reserve rate hike, with July hike probabilities falling sharply. However, ongoing geopolitical tensions and higher oil prices continue to support the US dollar, suggesting GBP/USD could remain volatile and biased lower unless UK data significantly outperform expectations.
GBP/USD remains within a broader medium-term uptrend after rebounding strongly from the 1.3180 support area. However, bullish momentum has moderated following the sharp rally toward 1.3530, with price now consolidating above the 1.3425 support level. As long as the pair continues to hold above this level, buyers retain control of the near-term structure and may attempt another push toward the 1.3530 resistance. A successful breakout above 1.3530 would expose the next key resistance at 1.3630. On the downside, a break below 1.3425 would signal fading upside momentum and increase the likelihood of a deeper retracement toward 1.3295, followed by the stronger support around 1.3180.
Momentum indicators suggest the rally is losing some steam. RSI has eased to around 54 after retreating from overbought territory and is hovering near its moving average, indicating that bullish momentum has weakened but remains slightly positive. Meanwhile, MACD remains marginally above the zero line, although the MACD line has crossed below the signal line and the histogram has turned negative, reflecting growing bearish pressure in the short term.
Resistance Levels:1.3530, 1.3630
Support Levels: 1.3420, 1.3295
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