The Pound fell for a fourth consecutive day against the Dollar on Friday following weak UK economic data, while worries about the economic fallout from the conflict in the Middle East pushed investors toward the safe-haven greenback.

Data released on Friday showed that Britain’s economy unexpectedly stalled in January, while long-term inflation expectations remained persistently high.

Economists said the strength of demand growth just before the Iran war began will be a key factor in discussions over how the Bank of England may respond to the resulting energy price shock.

The Pound was last trading 0.51% lower against the Dollar at the time of writing at $1.3273.

The renewed risk of persistent inflation is likely to prompt the Monetary Policy Committee to vote 8-1 in favour of holding rates rather than cutting them at next Thursday’s meeting, Reuters news agency reports.

However, once energy prices ease, or it becomes clear that demand is weak enough for underlying disinflation to continue despite higher energy costs, the Bank of England may resume interest-rate cuts.

The Euro gained 0.13% to 86.37 pence after touching 86.18 pence on Thursday, its lowest level since early February.

Investors are currently pricing in at least one interest rate increase by the European Central Bank in 2026.

Meanwhile, yields on British two-year government bonds were last up 0.5 basis points at 4.11%, after rising by more than 50 basis points since 2nd March as markets factored in a more hawkish stance from the Bank of England.

“The next rate cut, we think, will come in the second quarter this year, ⁠when the ​MPC sees more evidence of falling core inflation alongside ​a likely resolution of the Iran conflict,” said Sanjay Raja, chief UK economist at Deutsche Bank.