Pound-to-Dollar Forecast: GBP Holds near $1.36 as Iran Sanctions Raise China Risks

Modified: Wednesday, 26 August 2026 06:01 BST - Written by John Cameron

STORY LINK Pound-to-Dollar Forecast: GBP Holds near $1.36 as Iran Sanctions Raise China Risks

The Pound US Dollar (GBP/USD) exchange rate was largely flat on Tuesday, with investors weighing the potential economic consequences of the latest US sanctions on Iran and their implications for relations between Washington and Beijing.

At the time of writing, GBP/USD was trading at around $1.3635, virtually unchanged from Tuesday’s opening levels.

The US Dollar (USD) attracted some demand on Tuesday as uncertainty surrounding the latest US sanctions on Iran encouraged investors to favour traditional safe-haven assets.

The new measures, announced by US Treasury Secretary Scott Bessent, target foreign companies and organisations that continue to conduct business with Iran.

The restrictions could prove particularly contentious with China, which remains one of Iran's most important buyers of crude oil. Beijing has already warned that it will take the necessary measures to protect its interests, raising the prospect of renewed tensions between the world's two largest economies.

Despite this, gains in the 'Greenback' remained limited, with lingering concerns over the US inflation outlook and government intervention in the bond market continuing to weigh on USD sentiment.

The Pound (GBP) struggled to establish a clear direction on Tuesday, with a quiet UK economic calendar leaving Sterling without a strong domestic catalyst.

Lower UK government borrowing costs offered some support to the currency, although this was offset by a further reduction in expectations for Bank of England (BoE) interest rate increases.

As a result, GBP exchange rates remained largely rangebound as investors awaited more meaningful economic signals.

Near-Term GBP/USD Forecast: US Inflation Data in Focus

Looking ahead to Wednesday, the main driver for the Pound to US Dollar (GBP/USD) exchange rate is likely to be the release of the latest US core PCE price index.

As the Federal Reserve's preferred measure of underlying inflation, another easing in price pressures during July could weigh on the US Dollar by prompting markets to scale back expectations for further Fed rate increases.

The latest US GDP estimate will also attract attention, with the figures expected to confirm that economic growth slowed during the second quarter. A weaker reading could add to the pressure on the 'Greenback'.

Meanwhile, the UK's latest Confederation of British Industry (CBI) distributive trades survey may provide some support for Sterling if it points to a continued improvement in retail activity during August.

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TAGS: Pound Dollar Forecasts