GBP/USD remains subdued for the third consecutive trading day, hovering in the negative territory around 1.3190 during the Asian hours on Monday. The pair struggles as the safe-haven demand for the US Dollar (USD) increases amid heightened uncertainty in the Middle East.
US President Donald Trump set a fresh deadline for Iran to reopen the Strait of Hormuz on Tuesday, while escalating threats targeting its power plants and other civilian infrastructure. Iranian officials responded that Tehran would retaliate in kind against any attacks on its infrastructure, including striking comparable assets owned by or linked to the United States (US). Authorities in Tehran also stated that the strait would remain closed until compensation for war-related damages is secured.
The Greenback draws additional support as the conflict triggered a sharp surge in energy prices, heightening speculation that the Federal Reserve (Fed) may postpone rate cuts and could even raise borrowing costs later this year if inflationary pressures persist. Market participants are now looking ahead to the latest Federal Open Market Committee (FOMC) Meeting Minutes for clearer guidance on the central bank’s policy trajectory.
Furthermore, data released during Friday’s holiday indicated that the US economy added 178,000 jobs in March 2026, following a revised decline of 133,000 (previously reported as -92,000), and surpassing market expectations for a 60,000 increase. At the same time, the Unemployment Rate edged down to 4.3% in March from 4.4% in February, coming in better than forecasts.
The Pound Sterling (GBP) remains under pressure as the conflict has intensified concerns over a potential energy shock to the United Kingdom (UK) economy. The UK is particularly vulnerable due to its reliance on energy imports, while investors continue to express caution over the country’s fragile public finances.
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).
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.
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.
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.
