Pound to Dollar Forecast: Iran Fears Lift USD, GBP Slides Towards 1.34

Modified: Tuesday, 2 June 2026 07:01 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: Iran Fears Lift USD, GBP Slides Towards 1.34

The Pound to Dollar exchange rate (GBP/USD) came under renewed pressure as escalating Middle East tensions triggered a fresh bout of risk aversion across global markets. Sterling slipped back towards the 1.3400 level as rising oil prices boosted the US Dollar, while investors increasingly focused on the inflationary implications of a prolonged disruption to energy supplies and the potential impact on Federal Reserve policy.

GBP/USD Forecasts: Retreat to Near 1.3400

The Pound to Dollar (GBP/USD) exchange rate was held below 1.3500 on Monday and dipped sharply to near 1.3400 after the New York open as Iran fears increased again.

According to UoB; “only a breach of 1.3480 would indicate that the downside risk has dissipated.”

ING also expects firm resistance; “the stronger dollar story should keep a lid on GBP/USD near 1.3500.”

There is immediate support near 1.3400 with further support at 1.3370 and 1.3300.

The dollar posted gains and risk appetite deteriorated after Iranian sources stated that it was breaking off message exchanges with the US in protest over Israeli actions in Lebanon and Gaza.

Oil prices jumped higher while equities moved lower. There were also renewed losses in bond markets with the UK 10-year gilt just above 4.90% from 4.82% earlier in the day. Iran headlines tended to overshadow the latest data releases.

Rabobank commented; “The shift higher in crude and yields could be a sign of markets beginning to resign themselves to the idea that a deal will remain elusive in the short term. The creep from “any minute now” this time last week to “maybe, or maybe not” is underway.”

Markets will continue to debate the outlook for BoE and US interest rates as well as geo-political developments.

Commonwealth Bank of Australia head of FX Joseph Capurso discussed the dollar outlook; "USD will be heavily influenced by developments in the U.S.-Iran war and the U.S. nonfarm payrolls report for May."

The US monthly employment report will be released on Friday. Consensus forecasts are for an increase in non-farm payrolls of around 95,000 for May following the 115,000 gain the previous month with the unemployment rate holding at 4.3%.

ING commented; “it looks like the US macro story could be gaining a little momentum and be ready to provide some broader support to the dollar. This week will see a whole host of US job market reports and business surveys.”

The bank added; “This week's data should further support the growing narrative that the Fed can be comfortable with its full employment mandate and can focus squarely on the upside risks to inflation.”

Pepperstone head of research Chris Weston has a more balanced view; "The lineup of Federal Reserve speakers throughout the week should continue to reinforce a balanced two-way policy approach, with officials remaining open to both rate hikes and rate cuts depending on incoming data."

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TAGS: Pound Dollar Forecasts