GBP/USD Forecast: US Dollar Falls as Middle East Peace Hopes Lift Risk Appetite

Modified: Monday, 15 June 2026 20:01 BST - Written by David Woodsmith

STORY LINK GBP/USD Forecast: US Dollar Falls as Middle East Peace Hopes Lift Risk Appetite

The Pound US Dollar (GBP/USD) exchange rate climbed to a ten-day high on Monday, as news of a framework peace agreement between the US and Iran lifted risk appetite.

At the time of writing, GBP/USD was trading at $1.3426. The pairing had retreated from an earlier peak of $1.3461, but remained higher on the day.

The US Dollar (USD) opened the week on the back foot, with demand for the safe-haven currency dented by growing optimism over a potential de-escalation in the Middle East.

Markets were encouraged over the weekend after the US and Iran reportedly agreed the outline of a peace deal aimed at ending hostilities and reopening the Strait of Hormuz. The agreement is expected to be formally signed on Friday.

The prospect of reduced geopolitical disruption lifted global sentiment, prompting investors to move away from the safe-haven US Dollar and into riskier assets.

However, the ‘Greenback’ avoided sharper losses as a degree of unease lingered. Israel has continued military operations in Lebanon, with Israeli Defence Minister Israel Katz stating that the IDF will remain in the country.

This kept investors wary, particularly as Iran has previously pushed for Lebanon to be included in any broader settlement. As a result, lingering doubts over the durability of the peace deal helped limit USD’s downside.

The Pound (GBP) found support from the brighter market mood, with the increasingly risk-sensitive currency also buoyed by a pullback in UK government bond yields.

Borrowing costs softened as global energy prices retreated, easing fears that renewed inflationary pressures could force interest rates higher again.

This helped calm concerns over the UK’s vulnerable fiscal outlook, giving Sterling an additional lift during Monday’s session.

Near-Term GBP/USD Forecast: Pound and US Dollar to Track Risk Appetite

Looking ahead, developments in the Middle East are likely to remain the main driver of the Pound US Dollar exchange rate on Tuesday, with both the UK and US data calendars looking relatively quiet.

If hopes for a lasting peace deal continue to support a risk-on mood, the increasingly risk-sensitive Pound could gain ground against the safe-haven US Dollar.

However, any signs that tensions are resurfacing, or that the proposed agreement could be at risk, may see investors turn cautious again. This could revive demand for the ‘Greenback’ and pull GBP/USD lower.

That said, movement may be limited ahead of a busy week of major events. The UK’s latest inflation and labour market figures, the Federal Reserve and Bank of England (BoE) interest rate decisions, and the Makerfield by-election could all keep investors cautious in the sessions ahead.

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TAGS: Pound Dollar Forecasts