GBP/USD rose for a second day on Wednesday, moving away from the weekly low of 1.3515–1.3510 and reaching about 1.3580 in the Asian session. The move followed renewed hopes of a US–Iran peace deal, which weakened the safe-haven US Dollar.
US President Donald Trump said “Project Freedom”, aimed at restoring commercial shipping through the Strait of Hormuz, would be paused for a short period to allow talks to progress. US Defense Secretary Pete Hegseth said the ceasefire holds for now and the US is not seeking to re-escalate tensions with Tehran.
Near Term Price Action
On Tuesday, GBP/USD closed near 1.3545 after a narrow session, with resistance around 1.3550. The pair has traded in a roughly 60-pip range over the past two sessions.
With a quiet UK data calendar until the weekend, near-term direction is expected to depend mainly on US Dollar moves. The Iran conflict and Strait of Hormuz closure have supported crude prices, while market sentiment remains fragile.
In another update, Sterling rose by over 0.20%, with GBP/USD around 1.3560 and attention on 1.3600. Softer oil prices, reduced USD demand, and US equities moving higher were also reported.
Looking back at 2025, we saw GBP/USD pivot entirely on hopes for a US-Iran peace deal, which briefly pushed the pair into the mid-1.3500s. The quiet UK calendar at the time made the Pound highly sensitive to swings in the US Dollar’s safe-haven status. This period highlighted how geopolitical headlines could completely overshadow domestic economic signals.
Policy Divergence And Market Drivers
That optimism around a lasting peace deal proved to be temporary, as the agreement never fully stabilized the region. We can see from current maritime shipping data that tanker traffic through the Strait of Hormuz, while improved from the 2025 lows, remains 8% below the historical average. This lingering risk means sudden flare-ups can still trigger demand for the Dollar, creating volatility.
Today, the market’s focus has shifted decisively from Middle East geopolitics to central bank policy divergence. The Bank of England is now grappling with persistent domestic inflation, which the Office for National Statistics reported as holding at 3.1% for the first quarter of 2026. This contrasts with a more cautious US Federal Reserve, which held rates steady in April, citing concerns over slowing manufacturing output.
This policy difference has been the primary driver lifting GBP/USD toward the 1.4100 level we see today. The interest rate differential between the UK and the US has widened by 25 basis points since the beginning of the year in favor of Sterling. Traders are now pricing in at least one more Bank of England rate hike by the end of the summer.
Given this shift from unpredictable event-driven spikes to a more predictable policy-driven trend, derivative strategies should adapt accordingly. We are seeing implied volatility for GBP/USD options fall to yearly lows, very different from the sharp spikes witnessed during the 2025 Iran news cycle. This environment favors strategies like selling out-of-the-money puts to collect premium, capitalizing on the pair’s steady upward momentum.
