British Pound extends range play; holds above 1.3200 as bullish USD caps upside

The GBP/USD pair extends its consolidative move during the Asian session on Tuesday, trading above the 1.3200 mark and within a familiar range held over the past two weeks or so.

Investors have been pricing in tighter monetary policy ‌from the Bank of England (BoE) amid sticky inflation due to elevated energy prices, which is seen underpinning the British Pound (GBP). The US Dollar (USD), on the other hand, pauses for a breather following the recent strong rally to its highest level since April 2025 and turns out to be another factor acting as a tailwind for the GBP/USD pair.

That said, persistent geopolitical uncertainties and elevated US bond yields remain supportive of the bullish undertone surrounding the USD. In the latest developments surrounding the Middle East crisis, Yemen's Houthi group said on Monday that it carried out three military operations using ballistic and cruise missiles and drones against airports, an oil facility, and military sites across Saudi Arabia.

Adding to this, media reports suggest that Israel is preparing a potential attack against Iran, either in coordination with the US or independently. Furthermore, a deepening fiscal shock in France led to an extended rout in the fixed income market, keeping US bond yields close to multi-year highs. This, in turn, continues to act as a tailwind for the safe-haven buck and caps the upside for the GBP/USD pair.

Meanwhile, data released last week pointed to moderation in inflationary pressures in the US, which, along with the weak US Nonfarm Payrolls (NFP) report, tempered expectations for a Federal Reserve (Fed) rate hike in October. Traders, however, are still pricing in over an 80% chance that the US central bank will raise borrowing costs by the end of this year, validating the positive outlook for the USD.

Traders, however, seem hesitant to place fresh directional bets and opt to wait for more cues about the Fed's policy path. Hence, the focus will remain glued to the release of the FOMC Minutes on Wednesday. Apart from this, speeches from influential FOMC members and the incoming geopolitical headlines will play a key role in driving the USD, which should provide some impetus to the GBP/USD pair.

GBP/USD 4-hour chart

Technical Analysis

The recent range-bound price action might be categorized as a bearish consolidation phase against the backdrop of the decline from the August swing high. Moreover, the GBP/USD pair trades beneath the 100-period Simple Moving Average (SMA) dynamic barrier on the 4-hour chart, suggesting that recovery attempts remain vulnerable. The 100-period SMA at 1.3319 marks the key level bulls would need to overcome to ease downside pressure and open the way toward higher levels. On the downside, weakness below 1.3180 would reaffirm the negative bias and expose the GBP/USD pair to further slippage.