FX.co ★ Pound Drops to Two-Week Lows Amid US-Iran Tensions

The British pound slipped to around $1.345, its lowest level since April 10, posting a 0.4% weekly decline against the US dollar amid a fresh wave of risk aversion. Sentiment deteriorated as US-Iran negotiations stalled and the Strait of Hormuz remained effectively closed. Earlier optimism over a possible diplomatic breakthrough has faded following the end of a two-week ceasefire and the lack of any new talks being scheduled.

Domestically, UK retail sales rose 0.7% month-on-month in March, well above the consensus forecast of a 0.2% increase. The gain was driven largely by motorists stocking up on petrol as prices surged in response to the conflict in Iran. Excluding fuel, retail sales were up a more modest 0.2%. The stronger-than-expected data has reinforced expectations of tighter monetary policy from the Bank of England, with markets now fully pricing in two 25-basis-point rate hikes in 2026 and assigning around a 30% probability to a third increase before the end of the year.