FX.co ★ Pound Holds Steady as Markets Await Middle East Clarity

The British pound stabilized around $1.34 as investors stayed cautious, awaiting clearer signals on the Middle East peace process. Sterling drew support after US President Donald Trump called off planned strikes on Iran, indicating a diplomatic resolution to the conflict was still possible, even as uncertainty lingered following Tehran’s denial of any ongoing or planned negotiations. At the same time, last week’s Bank of England meeting reinforced expectations that policymakers are in no hurry to tighten monetary policy, leading markets to pare back bets on interest rate hikes in 2026. The BoE voted 6–3 to leave rates unchanged, with three members backing an increase, compared with expectations of a 7–2 split. Nonetheless, Governor Andrew Bailey played down the likelihood of an imminent tightening cycle, saying the disinflation process remains on track, while some policymakers indicated that rate cuts could return to consideration if Middle East tensions subside.