Pound To Dollar Price Forecast: GBP Steady As Markets Eye US PCE Inflation Data

The Pound to Dollar (GBP/USD) exchange rate traded sideways on Wednesday as cautious optimism surrounding a potential US-Iran peace agreement offset concerns over the UK economic outlook.

At the time of writing, GBP/USD was trading around $1.3446, little changed from the start of the session.

DAILY RECAP:

The US Dollar (USD) traded without strong direction on Wednesday as improving sentiment surrounding negotiations between Washington and Tehran reduced demand for the safe-haven currency.

Investor confidence improved after reports suggested discussions between the US and Iran continue to make progress behind the scenes.

Markets were particularly encouraged by reports from Iranian state media claiming that an initial framework agreement could lead to the Strait of Hormuz reopening to commercial shipping within weeks.

The prospect of easing tensions in the Middle East and a gradual restoration of energy exports helped improve broader market sentiment and limited demand for defensive assets such as the US Dollar.

However, losses for the ‘Greenback’ remained relatively modest overall as investors remained cautious about assuming a final agreement would be reached quickly.

Meanwhile, the Pound (GBP) struggled to attract support after confirmation that the UK energy price cap will rise again from July.

The announcement renewed concerns about pressure on household finances and the wider outlook for UK consumer spending during the second half of the year.

Investors worried that higher energy bills could further squeeze disposable incomes at a time when broader UK economic momentum is already showing signs of slowing.

These concerns largely offset support from easing UK borrowing costs, with falling gilt yields otherwise helping to stabilise Sterling sentiment in recent sessions.

GBP/USD Forecast: US Core PCE Inflation Data in Focus

Looking ahead, the latest US core PCE price index is likely to act as the main catalyst for the Pound to Dollar exchange rate.

The Federal Reserve’s preferred inflation gauge is expected to show a modest rise in underlying US price pressures during April.

A stronger reading could reinforce expectations that the Fed may need to maintain higher interest rates for longer, potentially boosting the US Dollar.

For Sterling, investors will also monitor comments from Bank of England policymaker Sarah Breeden.

As one of the more cautious members of the Monetary Policy Committee, any remarks signalling reluctance toward a near-term interest rate hike could place fresh pressure on the Pound.