GBP/USD rebounds as Greenback pressure eases

• GBP/USD found a slight rebound to muscle back above 1.3450 on Thursday.
• Despite near-term Greenback strength on geopolitical concerns, markets took a break during the midweek US holiday session.
• Israel-Iran tensions continue to rise, and the Trump administration is drawing out a decision on getting involved directly.

GBP/USD found some room on the high side on Thursday, climbing back above the 1.3450 level after catching an early technical bounce from the 1.3400 handle. Broad-market flows have favored the US Dollar recently as Middle East tensions continue to rise, but US markets were dark for a national holiday on Thursday, giving Cable some room to breathe and easing off of USD bidding.

According to a CBS reporter posting on the X (nee Twitter) social media platform, President Donald Trump may be considering an order for American military assets to target an Iranian nuclear production facility. If the Trump administration decides to go ahead with the reported proposal, it will be the first time the US has deployed military assets in a pre-emptive manner since the 2003 invasion of Iraq. Citing an Israeli government official, The Times of Israel reported that the Israeli government expects a final decision from the Trump administration within the next 24 to 48 hours.

Reports citing three separate diplomats have confirmed that personnel within the US administration, specifically US Special Envoy to the Middle East Steve Witkoff, has been in regular contact with his Iranian counterpart, helping to temper some of the emotional fallout striking off-market traders on Thursday. Iranian Foreign Minister Abbas Araghchi reportedly signaled to US Envoy Witkoff that the Iranian government is willing to be 'flexible' on its nuclear plans and resume talks, but only if Israel ceases its long-range missile strikes. Iranian Foreign Minister Araghchi stated that he will travel to Geneva on Friday to meet with his European counterparts as well.

UK Retail Sales figures for May are due on Friday, but little market movement is likely to come out of the figures. Investors are broadly anticipating a contraction in Retail Sales data on a monthly basis, forecasting a print of -0.5% compared to April's 1.2% upswing.

GBP/USD price forecast

Thin Greenback volumes on Thursday gave GBP/USD a leg up, pushing the pair into a technical bounce from the 1.3400 level. The pair is still trading on the north side of the 50-day Exponential Moving Average (EMA) near 1.3355, and long-run bullish momentum still has a technical floor priced in from a rising trendline through the same area.

GBP/USD daily chart