Pound Sterling moves little as uncertainty prevails over US-Iran peace talks

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GBP/USD remains flat after two days of losses, hovering around 1.3360 during the Asian trading hours on Thursday. The pair remains steady as the US Dollar (USD) holds firm, with traders closely tracking developments in the Middle East amid persistent uncertainty over efforts to end the Iran war.

GBP/USD steadies as the US Dollar holds firm amid ongoing uncertainty over efforts to end the Iran war.
Iranian officials are reviewing the US proposal but signaled no willingness to engage in talks with Washington.
UOB economist highlighted a hawkish BoE shift, holding the Bank Rate at 3.75% after a 9–0 vote.

The White House stated that talks are ongoing, with the Trump administration reportedly sending a 15-point proposal to Iran via Pakistan to resolve the conflict. Senior Iranian officials are reviewing the US proposal but have signaled no willingness to engage in talks with Washington. However, Tehran indicated it would reject a US ceasefire offer, instead putting forward a five-point plan that includes sovereign control over the Strait of Hormuz.

The Pound Sterling (GBP) may find support from easing oil prices amid hopes of de-escalating Middle East tensions. UK inflation data for February showed headline CPI steady at 3%, in line with expectations, while core CPI edged higher to 3.2%, surpassing the 3.1% forecast. However, these pre-conflict figures had a limited impact on market sentiment.

UOB economist Lee Sue Ann pointed to a hawkish shift by the Bank of England (BoE), with the Bank Rate held at 3.75% following a unanimous 9–0 vote. The report removes earlier expectations for three rate cuts in 2026, now projecting the GBP Repo Rate to remain at 3.75% through the fourth quarter of 2026 as inflation risks persist.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.