Pound Steadies Near Two-Week Low on US-Iran Tensions, UK PMI

The British pound recovered from early losses to stabilize around $1.35 against the US dollar but remained at its weakest level since April 10. Investors balanced escalating US-Iran tensions, with no progress in peace talks and both nations deadlocked over the Strait of Hormuz, against stronger-than-expected UK PMI data. President Trump extended the April 7 truce indefinitely, awaiting a new Iranian proposal, though Tehran has signaled no immediate plans for negotiations. On the economic front, April’s PMI showed UK business activity rebounding after March’s war-induced slowdown, but the uptick partly reflects firms stockpiling supplies amid fears of price spikes and shortages. Politically, Keir Starmer’s ex-chief of staff, Morgan McSweeney, faces a Foreign Affairs Committee hearing next Tuesday over vetting allegations tied to Peter Mandelson, while Labour MP Jonathan Brash called Starmer’s resignation unavoidable due to the scandal’s fallout.

The British pound slipped below $1.35 against the US dollar today, reflecting market unease as tensions between the US and Iran persist. With no progress in peace talks, both countries remain at odds over control of the Strait of Hormuz. US President Trump confirmed that the truce agreed on April 7 will stay in place indefinitely, awaiting a new proposal from Iran, though Iranian officials have indicated no immediate intention to participate in further negotiations. On the UK political front, Morgan McSweeney, former chief of staff to Prime Minister Keir Starmer, is scheduled to appear before the Foreign Affairs Select Committee next Tuesday. The hearing follows claims by ex-Foreign Office chief Olly Robbins that Downing Street questioned the need for vetting Peter Mandelson. Meanwhile, Labour MP Jonathan Brash, who won Mandelson’s former Hartlepool seat in 2024, argued that the ongoing scandal has paralyzed the government, making Starmer’s resignation inevitable.

The British pound rose to $1.352, buoyed by hopes of easing tensions in the Middle East and as investors analyzed the latest UK inflation figures. US President Trump extended the Iran ceasefire indefinitely, despite stalled talks and an ongoing US naval blockade in the Strait of Hormuz. He stated that Pakistan, mediating the discussions, urged restraint but insisted the blockade would remain unless Iran concedes. Meanwhile, Iran’s Tasnim news agency hinted at possible US flexibility on the blockade. Economically, UK headline inflation for March reached 3.3%, up from 3.0% in February, largely driven by rising petrol prices due to the Iran war. Core inflation softened slightly to 3.1% from 3.2%, falling just below forecasts, while services inflation edged higher to 4.5% from 4.3%. Traders have slightly reduced their expectations for Bank of England rate hikes this year, pricing in around 39 basis points of increases, still pointing to two hikes.