GBP/USD Forecast: UK Inflation Data to Test Pound Sterling

Modified: Tuesday, 21 April 2026 21:11 BST - Written by David Woodsmith

STORY LINK GBP/USD Forecast: UK Inflation Data to Test Pound Sterling

The Pound to US Dollar (GBP/USD) exchange rate came under pressure on Tuesday as geopolitical tensions continued to weigh on market sentiment.

At the time of writing, GBP/USD was trading near $1.3507, down around 0.2% from the day’s opening levels.

The US Dollar (USD) found modest support, underpinned by steady demand for safe-haven assets.

Investor caution persisted as tensions between Washington and Tehran showed little sign of easing, with the existing ceasefire appearing increasingly unstable. Recent incidents, including disruptions to shipping and tighter controls in the Strait of Hormuz, have added to market unease.

Uncertainty also surrounds the next round of negotiations expected later this week, with reports suggesting Iran has yet to confirm its participation in the talks scheduled in Islamabad.

The Pound (GBP) struggled to gain traction following the release of the UK’s latest employment figures.

Although the headline unemployment rate unexpectedly dipped in February, underlying indicators pointed to a weakening jobs market.

Wage growth continued to ease, with average earnings slowing to around 3.6%, marking one of the softest readings in recent years. At the same time, payroll numbers declined and job vacancies fell to their lowest levels since 2021.

Economists noted that the drop in unemployment was partly driven by rising economic inactivity rather than stronger hiring, reinforcing the view that labour market conditions are deteriorating. This prompted investors to scale back expectations for further Bank of England rate increases.

Short-Term GBP/USD Forecast: UK Inflation in Focus

The Pound to US Dollar exchange rate could see some movement with the release of the UK’s latest inflation figures.

A stronger-than-expected reading may revive expectations that the Bank of England will need to maintain a tighter policy stance, potentially offering some support to Sterling.

Meanwhile, the US Dollar is likely to remain sensitive to developments in the Middle East.

If tensions escalate or doubts over the peace process deepen, safe-haven demand could strengthen the US Dollar. Conversely, any signs of progress in negotiations may lift risk appetite and weigh on the currency.

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TAGS: Pound Dollar Forecasts