Pound Sterling Near $1.33 amid Energy Price Concerns

Modified: Wednesday, 4 March 2026 21:31 BST - Written by Tim Boyer

STORY LINK Pound Sterling Near $1.33 amid Energy Price Concerns

The Pound to US Dollar (GBP/USD) exchange rate traded in a narrow range on Wednesday as investors weighed reports of potential diplomatic contact between Tehran and Washington.

At the time of writing, GBP/USD was hovering close to $1.3365, unmoved from the start of Wednesday's European session.

The US Dollar lost some momentum early as safe-haven flows eased slightly. The shift followed reports that figures linked to Iran’s intelligence services had indicated a willingness to explore dialogue with the United States.

According to coverage from The New York Times, Iranian officials are believed to have approached the US Central Intelligence Agency indirectly via an intermediary nation’s intelligence service to test the prospects for ending hostilities.

While there remains doubt in Washington over how serious the overture may be, the mere suggestion of backchannel discussions lifted market sentiment during the European morning session and weighed modestly on the ‘Greenback’.

However, the Dollar later found renewed support from domestic data releases. The latest ADP employment report showed stronger-than-expected job growth, while a robust reading from the US services PMI pointed to particularly strong expansion in the sector last month.

Sterling delivered a mixed performance as investors continued to assess the economic consequences of heightened tensions in the Middle East.

Surging UK gas prices have sharpened concerns that inflation could pick up again in the months ahead. In response, markets have pared back expectations for imminent interest rate cuts from the Bank of England.

Although reduced bets on monetary easing can offer support to the Pound, the broader outlook remains complicated. Higher borrowing costs combined with elevated energy bills risk placing additional strain on the UK economy, leaving some traders cautious about Sterling’s prospects.

Short-Term GBP/USD Forecast: Geopolitics and US Jobs Data in Focus

Movement in the Pound to US Dollar exchange rate is likely to remain closely aligned with developments in the Middle East. Any escalation, particularly if shipping through the Strait of Hormuz continues to be disrupted, could reinforce demand for the safe-haven Dollar.

USD traders may also remain cautious ahead of Friday’s US non-farm payrolls release. Expectations of a moderation in February’s job growth could limit enthusiasm for further Dollar buying.

For the Pound, energy price trends will remain pivotal. Continued upward pressure on gas and oil costs may leave Sterling vulnerable, especially if markets grow increasingly concerned about the knock-on effects for UK inflation and growth.

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TAGS: Pound Dollar Forecasts