GBP Bounces Off Low vs USD Amid Rate Hike Expectations and Middle East Tensions
The British Pound (GBP) has seen a bounce off its one-week low against the US Dollar (USD), but analysts say upside potential appears limited.
The USD's pause after a strong move up to a nearly two-week high on Friday, amid month-end rebalancing, has been acting as a tailwind for the GBP/USD pair.
UK Chancellor John Healey's emphasis on maintaining fiscal discipline as the top priority for Prime Minister Andy Burnham's government ahead of the Autumn Budget on October 28 has also provided support to the GBP.
However, market bets for a US Federal Reserve rate hike in September have been lifted following comments from Fed Chair Kevin Warsh, which could cap losses for the safe-haven USD and limit gains for the GBP/USD pair.
Escalating tensions between the US and Iran have also contributed to a risk premium being priced into the USD, further limiting upside potential for the GBP/USD pair.