FX.co ★ Sterling Nears 1% Monthly Drop on Middle East Jitters

The British pound edged toward $1.32, hovering near its weakest level since early December and heading for a monthly loss of more than 1% against the US dollar. Market sentiment was dominated by risk aversion as investors evaluated the economic fallout from the prolonged Middle East conflict, with reports of US forces preparing for a potential ground operation overshadowing Washington’s assertions of progress in negotiations with Iran. At the same time, expectations for Bank of England policy shifted sharply: markets now forecast at least two interest rate increases in 2026, with a possible third, a notable reversal from earlier projections that had priced in two cuts.