Pound Slips as UK Economic Outlook Darkens

2026-04-29 08:23 By Joana Ferreira 1 min. read

The pound dipped to $1.35 as investors assessed updated UK economic forecasts and awaited policy decisions from the Fed and the Bank of England, as well as developments in US-Iran talks.

Lloyds revised its 2026 UK inflation forecast upward to 3.4% from 2.6%, while slashing its GDP growth estimate to 0.5% from 1.2%.

The bank no longer expects any Bank of England rate cuts this year, having previously anticipated two, and now projects unemployment to peak at 5.6% in Q4, up from 5.3%.

On monetary policy, both the Fed and the BoE are expected to keep rates unchanged this week, reflecting caution amid the Middle East crisis.

However, markets still anticipate two quarter-point BoE rate hikes in 2026.

Meanwhile, Brent crude surged to a four-year high as the US-Iran standoff continued, with reports that US President Trump directed aides to prepare for a prolonged naval blockade in the Strait of Hormuz to intensify economic pressure on Iran, according to the Wall Street Journal.



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Pound Slips as UK Economic Outlook Darkens
The pound dipped to $1.35 as investors assessed updated UK economic forecasts and awaited policy decisions from the Fed and the Bank of England, as well as developments in US-Iran talks. Lloyds revised its 2026 UK inflation forecast upward to 3.4% from 2.6%, while slashing its GDP growth estimate to 0.5% from 1.2%. The bank no longer expects any Bank of England rate cuts this year, having previously anticipated two, and now projects unemployment to peak at 5.6% in Q4, up from 5.3%. On monetary policy, both the Fed and the BoE are expected to keep rates unchanged this week, reflecting caution amid the Middle East crisis. However, markets still anticipate two quarter-point BoE rate hikes in 2026. Meanwhile, Brent crude surged to a four-year high as the US-Iran standoff continued, with reports that US President Trump directed aides to prepare for a prolonged naval blockade in the Strait of Hormuz to intensify economic pressure on Iran, according to the Wall Street Journal.
2026-04-29
Pound Slightly Down as US-Iran Talks Stall
The pound edged lower to $1.35 as the US-Iran impasse continues and domestic political pressures weigh on markets. Tensions intensified after a US official revealed President Donald Trump’s dissatisfaction with Iran’s latest proposal, which sought to delay nuclear program negotiations until the ongoing conflict and shipping disputes are resolved. In the UK, Prime Minister Keir Starmer faces a pivotal vote on Tuesday over whether to investigate his assurances to Parliament regarding the appointment of Peter Mandelson as US ambassador. While Starmer’s allies remain confident of securing the vote, the controversy risks overshadowing next week’s crucial local elections. Investors are also focused on the Bank of England’s policy decision on Thursday, with the central bank widely expected to hold interest rates at 3.75% amid the Middle East crisis. Analysts anticipate a near-unanimous or strong majority vote to maintain the current stance.
2026-04-28
Sterling Recovers Above $1.35 as Markets Eye Data
The pound steadied above $1.35, bouncing back from two-week lows, as investors await a packed week of economic data and global rate decisions while tracking US-Iran peace talks. The Bank of England is widely expected to hold rates at 3.75% amid the Middle East crisis, with analysts anticipating a near-unanimous or strong majority vote to maintain the status quo. This follows March’s UK inflation report last week, which showed CPI at 3.3% year-over-year, fueled by surging fuel prices, leading markets to price in at least two rate hikes this year, up from one, with a possible third. Adding to the economic pressures, oil prices have surged as the Strait of Hormuz remains blocked and US-Iran negotiations stalled. Political uncertainty is also rising ahead of the May 7 local elections, with Prime Minister Keir Starmer facing criticism over his appointment of Peter Mandelson as US Ambassador.
2026-04-27