The British Pound (GBP) traded cautiously against the US Dollar (USD) on Monday, hovering near the 1.3445 area as renewed geopolitical uncertainty weighed on market sentiment. Hopes for a potential peace agreement between the United States and Iran faded after fresh reports suggested diplomatic communications had stalled, increasing demand for the safe-haven Greenback.

According to Iranian media reports, Tehran suspended message exchanges with Washington in protest over ongoing regional tensions. Meanwhile, Iranian state television indicated that the risk of the current ceasefire collapsing has increased if military actions in the region continue. These developments prompted investors to move back into defensive assets, supporting the US Dollar across the currency market.

As a result, the US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, advanced to around 99.27, reflecting stronger demand for the US currency amid growing uncertainty.

On the economic front, the United States released stronger-than-expected manufacturing data. The ISM Manufacturing PMI climbed to 54.0 in May from 52.7 in April, reaching its highest level in four years. The report suggested that businesses accelerated orders to avoid future price increases. While the Prices Paid component eased slightly from 84.6 to 82.1, the overall data highlighted continued resilience in the US economy.

The combination of robust economic performance and geopolitical concerns has strengthened the US Dollar, limiting upside potential for GBP/USD. Investors are now looking ahead to a busy week of US economic releases, including the ISM Services PMI, labor market reports, and Friday’s highly anticipated Nonfarm Payrolls (NFP) data. Comments from Federal Reserve officials will also be closely monitored for clues about future monetary policy.

In the United Kingdom, the economic calendar remained relatively quiet. However, traders are awaiting remarks from Bank of England (BoE) Governor Andrew Bailey and the upcoming BoE Monetary Policy Report hearings. Expectations that the BoE may tighten policy further later this year continue to provide underlying support for Sterling.

Trade Idea:
Sell GBP/USD below 1.3435 targeting 1.3380 and 1.3330. A sustained move above 1.3490 could invalidate the bearish outlook and open the door toward 1.3550.