Pound-to-Dollar Outlook: Risk Aversion and Oil Prices Weigh on GBP

Modified: Friday, 24 July 2026 07:01 BST - Written by James Fuller

STORY LINK Pound-to-Dollar Outlook: Risk Aversion and Oil Prices Weigh on GBP

The Pound US Dollar (GBP/USD) exchange rate fell on Thursday as the escalating US-Iran conflict soured the market mood.

At the time of writing, GBP/USD was trading at $1.3318, down 0.4% on the day.

The US Dollar (USD) strengthened on Thursday as rising tensions in the Middle East prompted investors to favour safe-haven assets.

Although markets had initially remained relatively resilient despite the escalating conflict, risk appetite weakened as the situation deteriorated, lifting demand for the 'Greenback'.

As the US launched its 12th consecutive night of strikes on Iran, global oil prices reached $100 per barrel. Meanwhile, Yemen’s Houthi militia declared a blockade on Saudi Arabian ports, attacking Saudi oil tankers in the Red Sea and risking widening the conflict.

The Pound (GBP) faced modest pressure on Thursday as investors continued to reflect on Andy Burnham’s first week as Prime Minister.

Sterling had climbed in the run-up to Burnham entering Downing Street, with markets removing the political risk premium that had previously weighed on the currency.

However, the Pound has slipped back this week as uncertainty remains over how the government's planned tax cuts and increased spending commitments will be funded.

Near-Term GBP/USD Forecast: PMI Data to Drive End-of-Week Trade

Looking ahead, the UK's June retail sales figures will be released at the start of Friday's session. Forecasts point to a 0.3% decline in sales, which may leave the Pound on the defensive.

Focus will then shift to the UK's latest PMI surveys, with the services reading expected to be the key release for Sterling. Evidence of improving business activity in July could provide the currency with fresh support.

Later in the day, attention will turn to the latest S&P Global PMIs from the US. While these surveys typically carry less weight than the ISM figures, an improvement in July's activity could reinforce demand for the 'Greenback'.

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TAGS: Pound Dollar Forecasts