Pound Sterling underperforms as UK faces stagflation risks amid Middle East war
The Pound Sterling trades lower against its major currency peers, is down 0.22% around 1.3340 against the US Dollar (USD), during the Asian trade on Thursday. The British currency faces selling pressures amid fears that the United Kingdom (UK) economy could face stagflation risks due to higher energy prices, a situation in which inflation accelerates with economic growth and employment conditions remaining stagnant.
The ongoing war between the United States (US), Israel, and Iran, which has disrupted the global oil supply chain by choking the Strait of Hormuz, has prompted energy prices. Given that the UK imports a significant chunk of energy to fulfil its needs, rising energy prices could fuel inflationary pressures that are already running above the Bank of England’s (BoE) 2% target for a long period. In January, the UK headline inflation arrived lower at 3% Year-on-Year (YoY). Read more…
GBP/USD tests key moving averages as growth downgrade weighs
GBP/USD was nearly flat on Wednesday, edging up 0.08% to settle around 1.3370 in a quiet session. The pair has fallen sharply from its late-January high near 1.3870 and is now testing the 200-day Exponential Moving Average (EMA), with this week’s one-week forex heatmap showing Pound Sterling as one of the worst performers against the US Dollar, down about 1.4% on the week.
Chancellor Rachel Reeves delivered her Spring Statement earlier this week, with the Office for Budget Responsibility (OBR) cutting its 2026 growth forecast to 1.1% from 1.4%, citing weaker-than-expected activity in late 2025 and rising unemployment. The OBR acknowledged that the forecasts were finalised before the US-Israeli strikes on Iran, warning the conflict “could have very significant impacts on the global and UK economies.” Surging energy prices following the closure of the Strait of Hormuz have already pushed markets to scale back expectations for a Bank of England (BoE) rate cut at the March 19 meeting, with futures now pricing less than a 15% probability of a move. Read more…
GBP/USD rebounds toward 1.3400 as markets look past strong US data
The Pound Sterling (GBP) recovers some ground versus the US Dollar (USD) on Wednesday, though tensions in the Middle East remain high, pushing macroeconomic data releases into the backseat. A better-than-expected employment reading in the US was mainly ignored by traders with their sights set on Friday’s Nonfarm Payrolls report. At the time of writing, GBP/USD trades at 1.3361.
During the European session, GBP/USD edged towards its daily high of 1.3403 amid relief at a possible de-escalation of the conflict between the US and Iran. Nevertheless, Reuters reported that the “US sub sinks Iranian warship,” triggered a leg-down in the pair. Read more…
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