GBP/USD Edges Higher on Receding Fed Hike Bets, Geopolitics Capping Gains

The British Pound (GBP) has gained some traction against the US Dollar (USD), but its upside is capped due to geopolitical risks. The GBP/USD pair rose after receding Federal Reserve hike bets undermined the USD, but it struggles to capitalize on the uptick beyond the 1.3500 psychological mark.

Traders have scaled back their expectations for Fed rate hikes following a soft US Producer Price Index (PPI) report and a lack of surprise from the US Consumer Price Index (CPI). This has given the USD room to hold interest rates steady, undermining its value and offering support to the GBP/USD pair.

However, uncertainties surrounding the Middle East crisis continue to limit the downside for the safe-haven Greenback. The US-Iran standoff over the Strait of Hormuz keeps the geopolitical risk premium in play, warranting caution for USD bears.