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Middle East unrest sends Sterling on track for weekly decline

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The Pound edged up slightly against the Dollar on Friday but was on course for a weekly decline, as concerns over the Israel-Iran conflict boosted demand for traditional safe-haven assets like the US Dollar.


Earlier in the session, disappointing UK retail sales data and the Bank of England’s decision to hold interest rates steady had minimal impact on the currency.


Sterling rose 0.2% to $1.3495 on the day but posted a 0.6% loss for the week, following two straight weeks of gains, Reuters news agency reports.


The greenback was on course for its largest weekly gain in over a month on Friday.


The Bank of England, which kept interest rates steady at 4.25% on Thursday as anticipated, noted it was keeping an eye on risks stemming from a softening labour market and rising energy prices due to the ongoing conflict. This briefly pushed the Pound lower against the Dollar.


“The Pound was only lightly touched by a consensus Bank of England hold yesterday,” according to ING FX Strategist Francesco Pesole.


“Yesterday's 6-3 vote split for a cut can be interpreted marginally on the dovish side and is allowing markets to reinforce their conviction call on an August cut.”


Markets are now pricing in nearly a 60% probability of a 25-basis-point rate cut at the Bank of England's next policy meeting.


Meanwhile, the Euro edged up slightly to 85.43 pence on Friday, poised to record its second consecutive weekly gain.


Sterling briefly trimmed some of its earlier gains against the Dollar following weaker-than-expected UK retail sales data. Retail volumes saw their steepest decline since December 2023 last month, as consumer demand dropped after a prior surge in spending on food, summer clothing, and home improvement items.


“Retail sales in May brought significant payback” after a “hard to explain” strength in the previous four months, stated Allan Monks, chief UK economist at JP Morgan.


The retail sales data stats were released alongside government borrowing figures, which revealed a slightly higher-than-expected budget deficit of £17.7 billion for May.


While the UK economy expanded more strongly than anticipated in the first quarter of 2025, it contracted in April, impacted by the expiration of a property tax break and the effects of newly imposed US tariffs.


The Bank of England projects overall economic growth of 1% for 2025.

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Lithuania,

media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

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Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.