Pound Rebounds as Easing Middle East Tensions Lift Risk Sentiment

2026-07-27 08:03 By Joana Ferreira 1 min. read

The pound rose to $1.334, rebounding from a three-week low reached last week, as easing tensions between the US and Iran and a sharp decline in oil prices boosted risk sentiment.

Brent crude retreated from two-month highs after Washington and Tehran paused hostilities and resumed diplomatic contacts, helping to ease inflation concerns and prompting money markets to slightly scale back expectations for policy tightening.

Investors are now focused on the Bank of England's policy decision later this week, with policymakers widely expected to keep interest rates unchanged at 3.75%.

Recent inflation data has strengthened that view, with consumer price growth slowing to a 15-month low of 2.6% in June, below the BoE's forecasts.

A delayed pass-through of higher wholesale energy prices to regulated household bills has also kept UK inflation below that of the US and the euro area, where the European Central Bank is still expected to deliver another rate hike in September or October.



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Pound Rebounds as Easing Middle East Tensions Lift Risk Sentiment
The pound rose to $1.334, rebounding from a three-week low reached last week, as easing tensions between the US and Iran and a sharp decline in oil prices boosted risk sentiment. Brent crude retreated from two-month highs after Washington and Tehran paused hostilities and resumed diplomatic contacts, helping to ease inflation concerns and prompting money markets to slightly scale back expectations for policy tightening. Investors are now focused on the Bank of England's policy decision later this week, with policymakers widely expected to keep interest rates unchanged at 3.75%. Recent inflation data has strengthened that view, with consumer price growth slowing to a 15-month low of 2.6% in June, below the BoE's forecasts. A delayed pass-through of higher wholesale energy prices to regulated household bills has also kept UK inflation below that of the US and the euro area, where the European Central Bank is still expected to deliver another rate hike in September or October.
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Pound Holds Near July Low on Dollar Strength
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