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The GBP/USD pair is attempting to consolidate above the psychological 1.3600 level, showing recovery after opening the week with a bearish gap. However, moderate strengthening of the U.S. dollar may continue to limit further upside in the pair.
Recent developments between the United States and Iran, in which both sides rejected each other's peace proposals concerning the cessation of military activity and the restoration of shipping through the Strait of Hormuz, are unfolding amid serious disagreements over Iran's nuclear program. This has contributed to renewed military tensions and rising geopolitical risks, which in turn are increasing demand for the U.S. dollar as a safe-haven asset and may limit gains in GBP/USD.
Meanwhile, current events are acting as a catalyst for another increase in oil prices, intensifying inflation concerns.
In addition, the strong U.S. Nonfarm Payrolls report released on Friday reinforced expectations of a hawkish stance from the Federal Reserve and supported elevated U.S. Treasury yields. This further strengthens the dollar and increases caution among GBP/USD bulls.
On the other hand, the British pound is receiving support from easing concerns surrounding Prime Minister Keir Starmer's position, especially after the Labor Party suffered significant losses in local elections in England and during parliamentary votes in Scotland and Wales. The pair is also supported by hawkish signals from the Bank of England, which has hinted at the possibility of raising interest rates if inflation remains elevated.
As for the outlook ahead, no major economic data releases capable of significantly influencing the market are scheduled for Monday. Therefore, price action will largely depend on the behavior of the U.S. dollar and incoming geopolitical headlines. Nevertheless, the mixed fundamental backdrop, combined with the sideways price trends observed in recent weeks, suggests that it may be prudent to wait for clearer signals confirming continued upward momentum before opening long positions on the pair.
From a technical perspective, there are no clear bullish signals at the moment. However, oscillators remain in positive territory, confirming that bulls still maintain an advantage in the market. In addition, the pair continues to trade above all major moving averages, which also supports the bullish outlook.
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