The Pound to Dollar (GBP/USD) exchange rate moved lower on Tuesday as renewed geopolitical tensions boosted demand for the safe-haven US Dollar.
At the time of writing, GBP/USD was trading around $1.3490, down roughly 0.3% on the day.
Pound to Dollar (GBP/USD): 1.35113 (-0.2%)
Euro to Dollar (EUR/USD): 1.17125 (-0.09%)
Dollar to Japanese Yen (USD/JPY): 159.5515 (+0.12%)
DAILY RECAP:
The US Dollar (USD) strengthened through Tuesday’s session as rising tensions in the Middle East dampened market sentiment.
Concerns intensified after reports suggested limited progress in negotiations between the US and Iran, particularly over the reopening of the Strait of Hormuz.
Investor caution increased as US President Donald Trump reportedly remained dissatisfied with the latest proposal, fuelling a broader risk-off mood and supporting demand for the ‘Greenback’.
However, gains in the US Dollar were capped as markets remained cautious ahead of the Federal Reserve’s upcoming interest rate decision.
Meanwhile, the Pound (GBP) struggled for direction, weighed by renewed concerns over the UK’s inflation outlook.
A sharp rise in energy prices added to these worries, with Brent crude climbing to a one-month high and raising fears of sustained price pressures.
While higher inflation could bolster expectations for tighter monetary policy from the Bank of England (BoE), markets remain concerned about the potential impact on household spending and economic growth.
GBP/USD Forecast: Focus on Fed and BoE Guidance
Looking ahead, attention will shift to the Federal Reserve’s interest rate decision, which is expected to be the key driver for GBP/USD in the near term.
Although no policy changes are anticipated, the tone of the Fed’s forward guidance will be closely watched.
Any indication that policymakers intend to maintain a restrictive stance could provide further support to the US Dollar.
Meanwhile, Sterling may remain subdued ahead of the Bank of England’s policy announcement.
With the BoE also expected to leave rates unchanged, markets will focus on guidance, where a more cautious tone could weigh on the Pound.
