GBP/USD, Gold Forecast: Two trades to watch

GBP/USD falls as the USD rallies and Trump reignites Iran escalation fears

• Trump’s comments dampen de-escalation hopes
• Rising oil prices revive inflation worries
• UK economy looks vulnerable amid weak growth & fragile public finances

GBP/USD is falling sharply on Thursday, retreating from yesterday’s weekly high near 1.3315 back towards the mid-1.32s, as President Trump’s latest comments have abruptly halted the pair’s two-day recovery.

While Trump repeated his two-to-three-week timeline for ending the war, he also threatened to strike Iran’s energy infrastructure if no agreement is reached. That combination has revived concerns over a prolonged disruption to global energy supply, pushing oil prices higher and reigniting inflation fears.

As a result, US Treasury yields are moving higher again, markets are reviving expectations that the Fed may need to keep rates elevated for longer, and the US dollar is benefiting from renewed safe-haven demand.

Sterling is particularly vulnerable in this environment.

The UK economy remains highly exposed to higher energy prices due to its dependence on imported energy, and both the pound and UK government bonds have come under pressure during the conflict as investors reassess the country’s inflation, growth, and fiscal outlook.

The broader concern is that the UK faces a more difficult stagflationary mix than some of its peers — with higher imported inflation arriving at a time when domestic growth is already weak and public finances remain stretched.

That said, while energy-driven inflation is likely to rise sharply as a result of the Iran conflict, markets may still be overestimating the likelihood of multiple Bank of England rate hikes in 2026.

The more likely scenario is that the BoE chooses to look through much of the initial energy shock unless it begins to generate more persistent second-round inflation effects via wages, services, or inflation expectations.

That is an important distinction.

Unlike in 2022, the UK economy today has more slack, weaker underlying demand, and a less overheated labour market. That suggests the BoE may not need to respond as aggressively to what is, at least initially, an externally driven inflation shock.

Therefore, the current backdrop is more likely to be sterling-negative, driven by weaker growth and fragile public finances, than sustainably supportive, driven by higher UK rate expectations.

GBP/USD forecast – technical analysis

After running into resistance at 1.3870, GBP/USD has rebounded lower, trading in a falling channel. The price found support at the 1.32 support zone, but the recovery faced rejection at 1.3340 resistance, reinforcing the bearish bias.

Sellers will look to retest the 1.32 zone, with a break below here opening the door to a deeper selloff towards 1.30.

Any recovery must retake 1.3340, the horizontal resistance and the upper band of the falling channel. A rise above here exposes the 200 SMA at 1.3420.

Gold pulls back from a 2-week high as Trump’s comments lift the USD

• Gold falls after 4-day winning run
• Trump’s remarks boost safe-haven USD demand
• Rising oil prices raise expectations of Fed leaving rates high for longer

Gold prices are falling sharply after being rejected from $4,800, a level that marked a near two-week high, as broad-based US dollar strength weighs on the precious metal.

The move lower follows overnight comments from President Trump, who said the war with Iran could be over within the next two to three weeks, but also warned that Iran would be hit “extremely hard” if no deal is reached.

Those remarks have complicated the market narrative. On the one hand, they suggest a possible end to the conflict; on the other hand, they heighten the risk of further escalation.

As a result, hopes of a clean de-escalation have faded, pushing oil prices and Treasury yields back higher and boosting the US dollar’s safe-haven appeal.

At the same time, the UAE is reportedly pushing for the reopening of the Strait of Hormuz and lobbying the UN Security Council for a resolution, underlining how central energy supply remains to the broader macro outlook.

Crude oil prices have rebounded after recent declines, reigniting inflation concerns and reinforcing expectations that the Federal Reserve may need to keep interest rates higher for longer.

That backdrop is typically unfavourable for gold. Higher Treasury yields raise the opportunity cost of holding non-yielding bullion, while a stronger dollar also makes gold more expensive for non-US buyers.

Gold has now fallen around $150 from its Asian session peak, and with markets still highly headline-driven, volatility is likely to remain elevated in the near term.

Gold forecast – technical analysis

Gold’s recovery from the 200 SMA ran into resistance at 4800, the 20 SMA, before rebounding lower, testing the 4650 support, the 38.2% Fib retracement of the 3150 low and 5598 high.

Should sellers break meaningfully below 4650, this opens the door to 4370, the 50% Fib level and the October high. A break below here exposes the 200 SMA at 4140, ahead of 4100, the 2026 low.

Any move higher would need to rise above the 20 SMA at 4800 to bring 5000 the round number, 50 SMA and 23.6% Fib level into focus.