The GBP/USD pair slipped as investors sought safe-haven assets amid rising tensions between Israel and Iran. On Thursday, the pair traded near 1.3410 during Asian hours, marking its third consecutive session of subdued movement. The US Dollar strengthened, driven by geopolitical concerns and expectations around monetary policy.
The Bank of England (BoE) is widely expected to hold its interest rate steady at 4.25% at its June meeting later today. In the UK, consumer price inflation (CPI) eased slightly to 3.4% year-on-year in May, down from 3.5% in April. Despite this decline, inflation remains well above the BoE’s 2% target. Markets currently price in roughly 48 basis points of rate cuts by the end of the year.
Meanwhile, tensions escalated as reports surfaced that US officials are preparing for a potential strike against Iran in the coming days. Bloomberg revealed that US plans for an Iran attack continue to evolve, while the Wall Street Journal reported that President Trump approved attack plans on Tuesday but remains open to diplomacy if Iran abandons its nuclear program.
The US Dollar also gained support from Federal Reserve Chair Jerome Powell’s remarks. Powell indicated that inflation is still above the Fed’s target and may rise in the coming months due to tariffs imposed by President Trump. He emphasized that the Fed’s current policy stance is appropriate given ongoing uncertainties. Powell noted that any future rate cuts will depend on labor market and inflation data.
At its June meeting on Wednesday, the Federal Reserve kept interest rates unchanged within the 4.25%–4.50% range, as expected. The Federal Open Market Committee (FOMC) projects around 50 basis points of rate cuts by the end of 2025.
