FX.co ★ Pound Steady Below $1.34 on Middle East Unrest

The British pound traded just below $1.34 as escalating tensions in the Middle East coincided with growing expectations of a tighter monetary policy from the Bank of England. The US and Iran carried out new strikes, with President Donald Trump warning that Iran is taking "too long" to negotiate a peace deal and will now "pay the price." On Wednesday, Iranian Parliament Speaker Mohammad Bagher Ghalibaf responded that Tehran would react "decisively and without delay" to any act of aggression. Rising energy prices stemming from the conflict have intensified inflation worries, prompting investors to price in at least a 25-basis-point rate hike by the Bank of England in September, alongside a strong likelihood of a second increase. Still, dovish Monetary Policy Committee member Alan Taylor—who was part of the 8-1 majority that voted to keep rates unchanged in April—said on Monday that current borrowing costs are already "quite restrictive" and that he sees no need for further tightening to bring inflation under control.