14.05.202618:35 Forex Analysis & Reviews: GBP/USD – Smart Money Analysis: The Pound Remains Under Pressure

The GBP/USD pair began a new upward movement, but the past three days have ended in complete failure for the pound. First, Iran and the United States once again failed to achieve any progress in negotiations. This was followed by a new wave of mutual threats. Donald Trump stated that the temporary ceasefire was on the verge of collapse and also said that he had never claimed the war in the Middle East was over. The market immediately began anticipating another escalation and started buying the safe-haven U.S. dollar, which negatively affected the current technical picture.

In addition, the U.S. inflation report came in higher than traders had expected, and the market reluctantly began considering the possibility of further monetary tightening by the FOMC before the end of the year. After all, what else can be done if U.S. inflation remains twice as high as the Federal Reserve's target level?

In the United Kingdom, Prime Minister Keir Starmer's ruling party suffered losses in local elections, which did not add optimism for pound buyers and also increased pressure on Starmer himself, raising the possibility of impeachment or a vote of no confidence. Over the past three days, the pound has lost around 100 points and is now threatening to invalidate Imbalance 20. Invalidation of the bullish pattern would occur below the 1.3453 level. Bulls need to recover as quickly as possible, while Tehran and Washington need to offer the market renewed hopes for peace.

The situation surrounding the resolution of the Middle East conflict appears completely stuck, and traders no longer understand which direction the market sentiment may swing next. Today it may favor the bulls, tomorrow the bears. This is exactly the kind of market environment we have observed in recent weeks. At the moment, bulls still maintain the stronger position, but confidence in peace in the Middle East and in the lifting of the Strait of Hormuz blockade is gradually fading.

The pound's rally initially began from a "Three Drives Pattern." Thus, traders received a bullish signal at the very beginning of the move, and the overall trend remains bullish. At present, the ceasefire in the Middle East remains fragile, although the parties involved continue attempts to negotiate, at least according to media reports.

However, the market cannot rely indefinitely on headlines unsupported by real developments. The Strait of Hormuz remains under a dual blockade. Tehran and Washington have been working toward lifting it for several weeks, but there has been no concrete result. The situation alternates between improving and deteriorating. Markets were filled with optimism about a month ago, but now they appear to be confronting the harsher reality.

The "Three Drives Pattern," marked by a triangle on the chart, allowed bulls to launch an offensive. Imbalance 18 gave traders an opportunity to open long positions, Imbalance 19 provided another opportunity, and Imbalance 20 did so once again. As a result, the market has generated four bullish signals within the current impulse move. Geopolitics enabled the bulls to resume buying pressure, but it could just as easily turn against them.

The economic news background on Thursday failed to attract much trader interest. UK GDP in the first quarter of this year increased by 0.6% quarter-over-quarter and 1.1% year-over-year, but the market found little positive in these figures. Industrial production contracted by 0.2%, despite forecasts for an even weaker result, yet the pound failed to gain any support from that report either.

In the United States, the overall fundamental backdrop remains such that, in the long term, there are few reasons to expect sustained dollar strength. Even the conflict between Iran and the United States changes little in that regard. Geopolitics temporarily restored interest in the dollar's safe-haven status for about two months, but the broader outlook for the U.S. currency remains difficult over the long term.

The U.S. labor market continues to weaken, the economy is approaching recession, and unlike the ECB and the Bank of England, the Federal Reserve is not planning additional monetary tightening in 2026. Four large protests against Donald Trump have already taken place across the United States, and the eventual departure of Jerome Powell could further worsen the dollar's outlook — particularly if Kevin Warsh were to lead a more dovish FOMC.

From an economic perspective, I see no solid reasons for long-term dollar appreciation.

Economic Calendar for the U.S. and the United Kingdom:

• United States — Industrial Production Change (12:30 UTC)

The May 15 economic calendar contains only one event, which is also unlikely to generate much interest under current circumstances. Therefore, the impact of the economic backdrop on market sentiment on Friday may remain extremely weak.

GBP/USD Forecast and Trading Tips:

The long-term outlook for the pound remains bullish. The "Three Drives Pattern" warned traders about the beginning of the rally, and since then three bullish patterns and three bullish signals have already formed. Therefore, despite geopolitical tensions, I continue to expect further appreciation of the pound under current conditions.

However, it must be acknowledged that geopolitics could easily ruin the bulls' momentum. My target for the pound remains the 2026 high at 1.3867. The reaction to Imbalance 20 has already allowed traders to open long positions for the third or fourth time, but bulls have come under serious pressure in recent days and currently lack support from the news background.

At the moment, there are no bearish patterns or bearish signals.