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2026.05.2708:54:27UTC+00Pound Little-Changed Amid Middle East Optimism

The pound was little changed at $1.344 as investors awaited further developments in the Middle East, amid optimism about a possible US–Iran peace agreement and fading expectations of additional Bank of England interest rate increases. Market participants remain focused on the region, encouraged by the recent absence of negative rhetoric from either side and sustained hopes that a deal to ease tensions and reopen the Strait of Hormuz is still attainable despite recent strikes. Traders have scaled back their expectations for BoE tightening and now price in about 40 basis points of rate hikes by year-end, with roughly a 50% probability of an increase at next month’s meeting. Attention is also shifting to forthcoming speeches by BoE policymakers for clues on the monetary policy outlook, as well as to the political backdrop surrounding Prime Minister Keir Starmer after Labour’s setbacks in recent regional elections.

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