GBP/USD Forecast: Pound Sterling Flat as Iran Talks Uncertainty Persists

Modified: Wednesday, 25 March 2026 21:34 BST - Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Sterling Flat as Iran Talks Uncertainty Persists

The Pound to US Dollar (GBP/USD) exchange rate struggled for direction on Wednesday, with markets unsettled by conflicting updates on Middle East diplomacy.

At the time of writing, GBP/USD was trading around $1.3418, almost unchanged from Wednesday's opening levels.

The US Dollar found modest support as geopolitical uncertainty continued to drive cautious trading conditions.

Investor sentiment remained fragile amid inconsistent messaging regarding possible peace negotiations between the US and Iran.

While US President Donald Trump suggested that Tehran is eager to strike a deal and indicated that Washington has outlined a potential framework for peace, Iranian officials rejected these claims, insisting that no formal discussions have taken place.

This disconnect has left markets unsure about the trajectory of the conflict, raising the risk that tensions could drag on or intensify, thereby supporting demand for safe-haven currencies like the US Dollar.

The Pound managed to remain relatively steady following the release of the UK’s latest inflation figures, which pointed to persistent underlying price pressures.

Although headline inflation held at 3% in February, in line with expectations, core inflation unexpectedly ticked higher to 3.2%.

This suggested that price pressures remain entrenched, even before factoring in the recent surge in global energy costs linked to the Middle East conflict.

As a result, markets have continued to adjust expectations for the Bank of England, with some investors now anticipating a more hawkish policy stance in the months ahead.

Short-Term GBP/USD Forecast: Geopolitics in Focus

Developments in the Middle East are likely to remain the dominant influence on the Pound to US Dollar exchange rate in the near term.

Ongoing uncertainty around potential peace talks is expected to keep investors cautious, which may continue to underpin the US Dollar if tensions fail to ease.

Any credible signs of progress toward a diplomatic resolution could weigh on the US Dollar by encouraging a shift back toward riskier assets.

For the Pound, attention will turn to upcoming UK retail sales data, with forecasts pointing to a slowdown in consumer spending that could act as a drag on Sterling toward the end of the week.

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TAGS: Pound Dollar Forecasts