The British Pound edged lower against the US Dollar on Friday after fresh economic data revealed that the UK economy contracted in April, dampening sentiment toward Sterling. Meanwhile, the US Dollar recovered from earlier losses as improving prospects for a diplomatic agreement between the United States and Iran boosted overall market confidence. At the time of writing, GBP/USD hovered near 1.3413, showing little net change on the day.

Investor sentiment improved after reports suggested that Washington and Tehran are nearing a landmark agreement that could be finalized in Geneva between June 15 and 17. While some Western media outlets indicated that a deal was close, Iranian officials pushed back against speculation regarding its details. Iran’s Foreign Minister stated that the Islamabad Memorandum of Understanding is approaching completion but emphasized that negotiations remain ongoing and media reports should be treated cautiously.

Further optimism emerged after reports from regional media indicated that both the United States and Iran had informed mediators of their readiness to sign an agreement. The prospect of reduced geopolitical tensions contributed to a sharp decline in energy prices, with West Texas Intermediate crude falling more than 2% to around $84.47 per barrel.

Lower oil prices have also helped ease inflation concerns. As a result, market expectations for additional Federal Reserve tightening have moderated. According to money market pricing, traders now anticipate approximately 16 basis points of rate hikes by year-end, compared with 22 basis points expected just a day earlier. This shift reflects growing confidence that inflationary pressures could soften if geopolitical risks continue to diminish.

Trade Idea:
Sell GBP/USD below 1.3380 targeting 1.3300, with a stop-loss above 1.3450, if weak UK data and improving risk sentiment continue supporting the Dollar.