- GBP/USD stays calm as a firm US Dollar draws safe-haven support from stalled US-Iran peace talks and Middle East tensions.
- Closing the Strait of Hormuz raises energy prices and inflation, keeping Fed interest rates higher for longer.
- BoE’s Megan Greene grew hawkish, backing faster rate hikes because response speed is as vital as size.
GBP/USD moves little following a four-day winning streak, trading around 1.3470 during the Asian hours on Wednesday. The pair steadies as the US Dollar (USD) remains firm, driven by stalled US-Iran peace negotiations and renewed tensions in the Middle East, continued to underpin safe-haven demand.
Iran launched ballistic missiles toward neighboring Kuwait and Bahrain. The United States Central Command (CENTCOM) said on Tuesday that it had intercepted and defeated a series of Iranian missile and drone attacks targeting regional neighbors, including Kuwait and Bahrain, while also carrying out self-defence strikes on Iran’s Qeshm Island, per ABC News.
A prolonged closure of the Strait of Hormuz threatens to drive energy prices higher and intensify global inflationary pressures, reinforcing expectations that the Federal Reserve (Fed) will maintain elevated interest rates for an extended period.
This higher-for-longer outlook is heavily supported by a resilient US economy, highlighted by the ISM Manufacturing PMI climbing to 54 in May 2026, up from 52.7 in the prior two months and beating forecasts to mark the strongest factory expansion since May 2022.
Further evidence of economic strength appeared in the labor market, where April JOLTS data showed Job Openings surging to a nearly two-year high of 7.6118 million alongside declining layoffs. With robust manufacturing and employment data complicating the inflation outlook, investors are now anxiously awaiting Friday’s Nonfarm Payrolls report for definitive clues on the future trajectory of monetary policy.
Bank of England (BoE) policymakers maintained a firm stance on inflation. Policymaker Megan Greene delivered hawkish remarks, signaling a growing justification for interest rate hikes and emphasizing that “the speed of the response is arguably just as important as its size.” Her comments follow statements from BoE Governor Andrew Bailey, who stressed the importance of public confidence in the central bank’s commitment to returning inflation to its 2% target.
