The GBP/USD pair halted yesterday's decline and attempted to recover from its lowest level since April 7 at 1.3260, recorded during the previous session. Spot prices have returned toward the 1.3300 level, supported by a moderate weakening of the U.S. dollar. However, further upward potential appears limited in the context of bearish fundamental factors.

U.S. President Donald Trump and Iranian President Masoud Pezeshkian signed a memorandum of understanding electronically, aimed at ending hostilities between the two countries and restoring navigation through the Strait of Hormuz. Trump also noted that the 60-day deadline for reaching a final agreement on Iran's nuclear program should not be considered strict, which improved investor confidence. This, in turn, triggered profit-taking in the U.S. dollar after its recent rally driven by the Federal Reserve's hawkish stance, which had pushed the currency to its highest level since late March, and provided support for GBP/USD.

As expected, the U.S. central bank left its overnight interest rate unchanged in the 3.50%–3.75% range and significantly revised its monetary policy statement, removing key wording that previously indicated the possibility of future easing. Moreover, the median projection for the federal funds rate by the end of 2026 now stands at 3.8%, up from the previous March forecast of 3.4%, signaling the possibility of at least one rate hike this year. This may put pressure on corrective dollar weakness and limit upside potential in GBP/USD amid declining expectations of more aggressive tightening by the Bank of England.

In fact, expectations for a BoE rate hike have weakened after the UK Office for National Statistics (ONS) reported on Wednesday that headline Consumer Price Index (CPI) inflation in May remained steady at 2.8% year-on-year. In addition, core inflation, which excludes volatile food and energy prices, came in below consensus, rising to 2.6% compared with 2.5% in April. These data reinforced the view that the Bank of England is likely to keep interest rates unchanged. This may discourage traders from opening bullish positions on the British pound and GBP/USD, as attention remains focused on the Bank of England meeting expected later today.

From a technical perspective, the pair encountered resistance at the 1.3300 level. Oscillators are in negative territory, indicating that bears currently dominate the market. For bulls to regain confidence, the pair would need to break above the psychological 1.3400 level and the convergence zone of the key 20- and 200-day simple moving averages (SMA). At present, however, the pair remains under bearish pressure.