FX.co ★ Pound Slightly Up on Middle East Optimism

The British pound strengthened to $1.352, supported by hopes of easing tensions in the Middle East and by investors’ assessment of the latest UK inflation data. US President Trump extended the Iran ceasefire indefinitely despite stalled negotiations and the continuation of a US naval blockade in the Strait of Hormuz. He said Pakistan, which is mediating the talks, had urged restraint but that the blockade would remain in place unless Iran made concessions. At the same time, Iran’s Tasnim news agency suggested there may be some US willingness to soften its stance on the blockade.

On the economic front, UK headline inflation rose to 3.3% in March from 3.0% in February, largely driven by higher petrol prices linked to the Iran conflict. Core inflation eased slightly to 3.1% from 3.2%, coming in just below expectations, while services inflation ticked up to 4.5% from 4.3%. Traders have trimmed their expectations for Bank of England interest-rate increases this year, now pricing in about 39 basis points of tightening—still consistent with roughly two rate hikes.