The pound pared early losses to trade slightly above $1.34 as investors weighed developments in Middle East diplomacy against shifting expectations for UK interest rates. According to Axios, US and Iranian negotiators have reportedly agreed on a 60-day memorandum of understanding to extend a ceasefire and launch talks over Iran’s nuclear program, though it still awaits final approval from President Trump.
Despite this tentative progress, geopolitical tensions remain elevated, with ongoing US–Iran exchanges and renewed Israeli strikes on Hezbollah positions in Lebanon, even under a fragile ceasefire. The subsequent pullback in oil prices helped alleviate some inflation worries, leading investors to trim expectations for additional Bank of England rate hikes. Market sentiment was further shaped by recent UK data indicating a cooling labor market, weaker-than-expected inflation, and signs of moderating economic activity.
