GBP/USD Sees Modest Rebound as US Dollar Weakness Continues
The US dollar index weakened this week, supporting a modest rebound in GBP/USD. The Sterling extended its gains against the US dollar on Monday, building on a rebound from a three-week low seen on Friday.
The primary driver behind GBP/USD's upside was broad-based US dollar weakness, as markets reduced allocations to safe-haven assets amid signs of easing tensions in the Middle East. The United States had previously paused a 13-day military operation, while Iran halted further actions targeting US allies, prompting investors to reassess the risk of conflict escalation.
The decline in the DXY became the main catalyst for GBP/USD's short-term rebound. Meanwhile, a sharp drop in crude oil prices alleviated concerns about energy-driven inflationary pressures, further diminishing expectations that the Federal Reserve would maintain an aggressively hawkish stance.