The GBP/USD pair started the new week with a bearish gap. However, spot prices managed to rebound from the Asian session low and are now trading above the key psychological level of 1.3400.

Global risk sentiment deteriorated following the failure of peace talks between the US and Iran over the weekend, strengthening the US dollar as the primary reserve currency and putting additional pressure on GBP/USD. The negotiations ended without meaningful results despite nearly 21 hours of intense discussions. Moreover, US President Donald Trump announced the start of a blockade of the Strait of Hormuz by the US Navy, increasing the risk of escalation in the Middle East and threatening the fragile two-week truce.At the same time, recent geopolitical developments have triggered a sharp rise in oil prices, intensifying inflation concerns. This comes after Friday's data showed that US inflation in March reached its highest level in four years. As a result, investors may need to abandon expectations of Federal Reserve rate cuts and instead closely monitor the possibility of rate hikes this year. These expectations are driving up US Treasury yields, which further supports the dollar. However, hawkish expectations from the Bank of England are helping to limit losses in GBP/USD.Signals from the Bank of England about a possible interest rate hike as early as April increase risks for an economy that remains highly vulnerable to energy price fluctuations due to the conflict with Iran. This may prompt traders to refrain from taking aggressive bullish positions on the pound. Therefore, it would be prudent to wait for sustained buying momentum before entering positions aimed at continuing the recent strong recovery in GBP/USD.

From a technical perspective, the pair is attempting to break above the very important 200-day SMA, along with the confluence of the equally significant 100-day and 50-day SMAs. If bulls succeed, bears may lose control in the near term. The next upward target for bulls would be the 1.3485 level.

If prices fail to hold above 1.3380, this could accelerate the decline toward the 20-day SMA, located around 1.3322. At present, oscillators are mixed, but the Relative Strength Index has moved into positive territory, indicating a bullish advantage in the market.

The table below shows the percentage change of the US dollar against major currencies today. The US dollar has shown the strongest performance against the British pound.