GBP/USD Forecast: Pound Sterling Slips as Middle East Tensions Support USD

Modified: Wednesday, 8 July 2026 21:01 BST - Written by James Fuller

STORY LINK GBP/USD Forecast: Pound Sterling Slips as Middle East Tensions Support USD

The Pound US Dollar (GBP/USD) exchange rate ticked downwards on Wednesday, with escalating tensions in the Middle East prompting a risk-off market mood.

At the time of writing, GBP/USD was holding around $1.3339, down marginally on the day.

The US Dollar (USD) enjoyed modest gains on Wednesday as tensions in the Middle East continued to intensify.

Earlier in the week, shipping vessels came under fire in the Strait of Hormuz, prompting the US to launch retaliatory strikes against Iranian targets and reimpose economic sanctions. In response, Tehran directed military action towards American allies in the area.

Following these latest confrontations, US President Donald Trump declared that he considers the memorandum of understanding with Iran to be 'over'.

Crucially, the president also signalled that the door to future negotiations has not been completely closed. While an anxious atmosphere lent support to the safe-haven 'Greenback', the broader aversion to risk remained contained by enduring hopes that both sides might still find a diplomatic path to peace.

Meanwhile, the increasingly risk-sensitive Pound (GBP) faced headwinds as global risk appetite deteriorated.

Downward pressure was limited, however, as market participants maintained hope that the latest exchange of strikes between Washington and Tehran would prove to be a temporary setback.

At the same time, a steady reduction in domestic political anxiety offered further support for Sterling.

Near-Term GBP/USD Forecast: FOMC Minutes in the Spotlight

Looking forward, the US Dollar will face close scrutiny on Wednesday evening as the Federal Reserve publishes the minutes from its June policy meeting.

Currency traders are eager for fresh insights from central bankers regarding the probability and timing of future interest rate hikes. Should the account reveal that officials maintained a predominantly hawkish stance last month, the 'Greenback' could receive a boost.

On Thursday, market attention turns toward the latest US initial jobless claims report. An expected increase in the number of individuals filing for unemployment benefits could put downward pressure on the US Dollar.

The Pound will likely respond to political developments on Thursday when nominations for the Labour leadership race officially open. If frontrunner Andy Burnham looks set to secure the position without a contest, Sterling could strengthen.

Finally, broader risk sentiment is expected to remain a pivotal catalyst for the pair, with escalating tensions in the Middle East capable of generating sudden volatility.

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TAGS: Pound Dollar Forecasts