Pound Nears $1.35 on Middle East Ceasefire Hopes

The British pound rose toward $1.35, buoyed by optimism over a Middle East ceasefire. Israel and Lebanon’s agreement to halt hostilities raised hopes for broader de-escalation in the US-Israeli conflict with Iran, though Tehran denied progress in talks with Washington and clashes continued in Lebanon. Meanwhile, the Republican-led US House voted to halt military action against Iran, defying President Trump’s administration. On monetary policy, markets are pricing in nearly two Bank of England rate hikes this year, with the first expected in September, as policymakers balance rising inflation against early signs of a cooling labor market.

The British pound stayed just above $1.34 as investors remained cautious due to ongoing tensions between Iran and the US and fears that prolonged conflict could sustain high inflation. Iran claimed it targeted a US command ship in the Gulf of Oman, while the Republican-led House voted to halt US military action against Iran, breaking with US President Donald Trump. While this won’t stop attacks, it represents a rare rebuke of his administration. Israel and Lebanon also agreed to a conditional ceasefire, with Prime Minister Benjamin Netanyahu warning of potential further strikes. On monetary policy, markets are anticipating nearly two Bank of England interest rate hikes this year, with the first increase widely expected in September, as policymakers navigate the dual challenge of tackling rising inflation while addressing early signs of a cooling labor market.

The British pound edged higher to $1.347 as investors awaited clarity on Middle East peace efforts. Conflicting accounts emerged from US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu regarding a call about the Lebanon conflict, with Trump stating he had urged both sides to cease hostilities, while Netanyahu’s description was less explicit. The mixed signals follow reports that Iran had paused negotiations with the US, insisting on an end to Lebanon clashes as a condition for any broader agreement, though Trump asserted that talks with Iran were progressing rapidly. On the monetary policy front, investors are pricing in nearly two Bank of England interest rate hikes this year, with the first increase fully expected in September. Policymakers face the dual challenge of addressing rising inflation while managing a labor market that is showing early signs of weakening.