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21/05/26
22
GBP/USD Steady as Softer UK Inflation Meets Iran Tensions
GBP/USD was little changed around 1.3435 in Asian trading on Thursday as markets balanced softer UK inflation against renewed geopolitical tension involving the United States and Iran. The pair has struggled to find direction ahead of key business activity data due later in the day from both countries.
Fresh UK data released on Wednesday pointed to a faster-than-expected easing in price pressures. Headline consumer inflation slowed to 2.8% year over year in April from 3.3% in March, below the 3.0% expected by economists. Core inflation, which strips out food and energy, also cooled to 2.5% from 3.1%, undershooting forecasts and reinforcing signs that domestic price growth is losing momentum.
The weaker inflation figures arrived alongside an unexpected increase in the UK unemployment rate to 5.0%, adding to the view that the Bank of England may have less scope to tighten policy aggressively in the months ahead. Interest-rate futures now imply about 52 basis points of additional tightening by December, down from roughly 60 basis points before the data were released.
Sterling also faced pressure from developments in Washington and Tehran. US President Donald Trump said talks with Iran were in the final stages, but warned of attacks if no agreement is reached. Iranian President Masoud Pezeshkian responded that Tehran was not preparing to concede and would retaliate against any strike. The threat of escalation has supported demand for the US dollar as a safer asset.
Investors are now focusing on preliminary May purchasing managers’ index readings from the UK and the US, which may offer a clearer view of growth momentum and help set the next direction for GBP/USD. For now, the pair remains confined near current levels as traders wait for fresh economic signals and clearer developments on the geopolitical front.
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