The Pound US Dollar (GBP/USD) exchange rate trended higher last week, supported by fluctuating Middle East headlines which periodically undermined demand for the safe-haven US Dollar.
Pound to Dollar (GBP/USD): 1.3515
Euro to Dollar (EUR/USD): 1.17637
Dollar to Japanese Yen (USD/JPY): 158.6545
WEEKLY RECAP:
The US Dollar (USD) experienced notable volatility last week as geopolitical developments drove shifts in market sentiment.
At the start of the week, USD found support from a flight to safety after the breakdown in US-Iran peace talks.
However, this strength proved short-lived.
Comments suggesting negotiations could resume weighed on the ‘Greenback’, before more hawkish rhetoric later in the week briefly revived demand.
By the end of the week, renewed optimism that a deal could be close once again pressured the US Dollar, as investors rotated back into risk-sensitive assets.
Meanwhile, the Pound (GBP) showed mixed performance.
Sterling initially strengthened following reports that the UK government is seeking closer economic alignment with the European Union, a move seen as supportive for long-term growth.
However, these gains faded after Bank of England Governor Andrew Bailey struck a cautious tone on monetary policy.
His remarks led markets to scale back expectations for further rate hikes, weighing on the Pound through the latter half of the week.
Even stronger-than-expected UK GDP data offered only limited support to Sterling.
GBP/USD Forecast: More Middle East Uncertainty Ahead
Looking ahead, developments in the Middle East are likely to remain a primary driver of GBP/USD.
Any signs of progress towards a lasting peace agreement could weaken the US Dollar by reducing safe-haven demand.
On the data front, markets will closely watch the UK’s latest inflation figures.
A stronger CPI reading could revive expectations for Bank of England tightening and provide support to the Pound.
