The GBP/USD pair is seen building on the previous day’s strong move up of around 125-pips and gaining some follow-through traction on Tuesday. This marks the seventh straight day of a positive move and lifts spot prices to the 1.3535-1.3540 region, or the highest since February 26, during the first half of the European session. Despite failed US-Iran peace talks over the weekend, investors continue to move towards riskier assets amid hopes that the door for diplomacy remains open and that negotiations would continue. This, in turn, undermines the safe-haven US Dollar (USD) and acts as a tailwind for the currency pair.

US Vice President JD Vance struck a cautiously optimistic tone on negotiations with Iran and suggested during an interview on Fox News that meaningful progress has been made even as talks have yet to deliver a breakthrough. Vance further added that the framework for a comprehensive agreement is achievable if Iran is willing to take the next step. Moreover, Reuters reported that negotiating teams from the US and Iran could return to Islamabad for another round of peace talks this week. The optimism, along with the uncertainty over future interest rate moves by the US Federal Reserve (Fed), drag the USD to its lowest level since early March and remains supportive of the bid tone surrounding the GBP/USD pair.

Signs of de-escalation of tensions in the Middle East keep Crude Oil prices depressed, easing inflationary fears and reviving bets for a potential interest rate cut by the Fed this year. Investors, however, remain worried about external energy shocks stemming from the instability in the Strait of Hormuz. In fact, US President Donald Trump said that the US Navy blockade on the strategic waterway has officially started, while Iran responded with threats on all ports in the Persian Gulf and the Gulf of Oman. This limits the downside for the black liquid, fueling worries about a possible spike in inflation. This, in turn, keeps the USD bulls on the sidelines and backs the case for a further appreciating move for the GBP/USD pair.

Meanwhile, market participants have ramped up bets on the Bank of England (BoE) tightening and are pricing in roughly three 25 basis points (bps) rate hikes in 2026, potentially starting in April, amid renewed inflation concerns. This marks a significant divergence in comparison to Fed expectations and validates the near-term positive outlook for the GBP/USD pair. Traders now look forward to the release of the US Producer Price Index (PPI), which, along with speeches from a slew of influential FOMC members, will drive the USD demand and provide some impetus to the currency pair. Nevertheless, the fundamental backdrop seems tilted in favor of bulls, suggesting that any corrective slide is likely to be bought into.

GBP/USD 4-hour chart

Technical Analysis:

The overnight move beyond the 1.3500 psychological mark comes on top of the recent breakout through the 200-period Simple Moving Average (SMA) on the 4-hour chart and favors the GBP/USD bulls. Adding to this, a positive Moving Average Convergence Divergence (MACD) reading suggests firm upside momentum. However, the Relative Strength Index (RSI) near 70 indicates that conditions are edging toward overbought, which could slow the advance rather than immediately reverse it.

On the topside, initial resistance is aligned with the 61.8% Fibonacci retracement level of the January-March fall, at 1.3867. On the downside, immediate support is seen at the 50% retracement at 1.3512, followed by the 38.2% level at 1.3429, while the 200-period SMA is near 1.3351 and the 23.6% Fibo. retracement at 1.3325 underpins the broader bullish structure ahead of stronger backing at 1.3158.

(The technical analysis of this story was written with the help of an AI tool.)