Pound to Dollar Forecast: GBP Rebounds as Iran Ceasefire Hits USD Demand

Modified: Wednesday, 8 April 2026 08:21 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: GBP Rebounds as Iran Ceasefire Hits USD Demand

The Pound to Dollar (GBP/USD) exchange rate dipped to 1.3180 lows after stronger-than-expected US payroll data on Friday, but the pair then rebounded to near 1.3250 as the dollar lost ground following a ceasefire agreement between the United States and Iran.

According to UoB; “To maintain the increase in [downward] momentum, GBP must not break above the ‘strong resistance’ level, currently at 1.3265.”

The dollar retreated in early Europe on Monday after the Pentagon confirmed that attacks between the United States and Iran had stopped under a two-week ceasefire agreement, while the White House stated that Israel had also joined the ceasefire framework.

Pakistan, which acted as an intermediary in the negotiations, welcomed the agreement and invited the parties to Islamabad on Friday for further talks.

There are, however, still important doubts surrounding the durability of the agreement.

Iranian state media reportedly portrayed the ceasefire as a Trump retreat rather than a mutual settlement, while negotiations continue over a ten-point Iranian proposal that includes demands for sanctions relief, reconstruction compensation and control over the Strait of Hormuz.

Even so, the immediate market reaction was decisive.

According to SEB, Brent crude slumped by just under 15% to around $95 per barrel, the US two-year Treasury yield declined more than 11 basis points to 3.72%, while the benchmark 10-year yield fell 10 basis points to 4.24%.

Asian equity markets posted strong gains, with the Nikkei index advancing 5% and the Kospi jumping as much as 7%, while European and US futures also pointed to strong gains at the open.

The dollar weakened on a broad front amid the improvement in risk appetite, with EUR/USD gaining around one cent to 1.1680.

This shift in market sentiment undermined defensive dollar support and helped GBP/USD recover from Friday’s lows.

Earlier, the US currency had gained support after the latest jobs report beat expectations.

Headline non-farm payrolls increased 178,000 in March compared with consensus forecasts of around 65,000, although February payrolls were revised down sharply to show a 133,000 decline from the original estimate of a 92,000 gain.

According to the household survey, the unemployment rate edged lower to 4.3% from 4.4%, although there was a net decline in the number of employed people.

The data also showed that employment has fallen by more than 600,000 since March 2025, while the number of people outside the labour force rose strongly.

The jobs data will also have failed to capture the impact of the Middle East conflict on business confidence and hiring intentions.

ING expressed reservations over the outlook; “Our concern is that with the Middle East conflict showing little sign of coming to an imminent conclusion, an overlay of heightened geopolitical, economic and market angst is not going to incentivise business to suddenly start hiring now.”

US data released later on Friday was also less supportive for the dollar.

The final reading of the services PMI retreated to 49.8 from the flash reading of 51.1 and the weakest reading for over three years.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented; “The PMI survey data show the US economy buckling under the strain of rising prices and intensifying uncertainty, as the war in the Middle East exacerbates existing concerns regarding other policy decisions in recent months, notably with respect to tariffs.”

The latest ceasefire developments have, for now, shifted market focus away from conflict escalation and back towards lower oil prices, lower Treasury yields and weaker defensive demand for the dollar.

If the ceasefire holds, GBP/USD could hold a firmer tone in the short term, although markets will remain extremely sensitive to any signs that the agreement is breaking down.

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TAGS: Pound Dollar Forecasts