British Pound rises toward 1.3500 as hopes for US-Iran deal improve market sentiment

• GBP/USD climbs toward 1.3500 as optimism over a potential US-Iran deal pressures the US Dollar.
• Markets remain cautiously optimistic over Middle East negotiations, though key disagreements continue to slow progress.
• Political uncertainty in the United Kingdom limits aggressive bullish bets on the British Pound.

The British Pound (GBP) strengthens against the US Dollar (USD) on Monday, with GBP/USD climbing toward the 1.3500 mark as improving optimism surrounding a possible US-Iran agreement boosts market sentiment and weighs on the Greenback. At the time of writing, the pair is up 0.54% on the day, hovering near its highest level since May 14.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, consolidates losses near the 99.00 mark after touching more than one-month highs around 99.50 last week.

Markets remain cautiously optimistic that the United States (US) and Iran are moving closer toward an agreement that could eventually end the conflict in the Middle East and reopen the Strait of Hormuz. A potential deal reportedly includes a 60-day ceasefire extension, the reopening of the Strait of Hormuz and the removal of the US naval blockade on Iranian ports, while negotiations over Iran’s nuclear program would continue.

Over the weekend, US President Donald Trump said negotiations with Iran were progressing “in an orderly and constructive manner,” though he added there was “no rush” to finalize an agreement because time was on the US side.

Meanwhile, Iranian Foreign Ministry spokesman Esmaeil Baghaei said some progress had been made in Pakistan-mediated talks with the US on “a large portion of the discussion topics,” but stressed that it does not mean “the signing of an agreement is imminent.”

However, the slow pace of negotiations continues to keep markets cautious, as major disagreements reportedly remain over Iran’s nuclear program, sanctions relief, the release of frozen Iranian assets and the US naval blockade on Iranian ports.

Against this backdrop, downside pressure on the US Dollar appears limited, while traders also remain cautious about placing aggressive bullish bets on the British Pound amid rising political uncertainty in the United Kingdom (UK).

At the same time, investor attention remains firmly focused on the monetary policy outlook. Although hopes for a potential US-Iran agreement have pushed crude Oil prices lower, prices remain elevated and continue to fuel inflation concerns.

Traders will closely monitor upcoming speeches from officials at the Federal Reserve (Fed) and the Bank of England (BoE) later this week for fresh clues on the interest rate outlook.

On the data front, the United Kingdom’s economic calendar remains relatively quiet this week, while in the United States, traders await the Personal Consumption Expenditures (PCE) Price Index data on Thursday.