GBP/USD moves up to about 1.3385. UK CPI inflation decreased more than anticipated to 2.6% in June. US initiated new military actions while Iran cautioned about potential regional instability. The GBP/USD pair rebounds to near 1.3385 during the Asian trading hours on Thursday. However, the potential upside for the major pair may be constrained in light of cooler-than-anticipated UK inflation data and rising tensions in the Middle East. Traders are expected to derive additional insights from the forthcoming UK Retail Sales report, scheduled for release later on Friday.
The UK headline Consumer Price Index inflation decelerated to 2.6% year-on-year in June, marking the lowest rate since March 2025, a decrease from 2.8% in May, as reported by the Office for National Statistics on Wednesday. This figure came in softer than the market expectations of 2.7% growth. Meanwhile, the core CPI, excluding volatile food and energy items, increased by 2.6% year-over-year in June, matching the previous reading and exceeding the forecast of 2.5%. In June, the UK Consumer Price Index inflation registered a decline to 0.1%, a decrease from the 0.2% observed in May, aligning with market expectations.
Traders expect the Bank of England to maintain its benchmark interest rate at 3.75% in the upcoming week as it evaluates the ramifications of the conflict in the Middle East. Financial markets were anticipating one or potentially two quarter-point interest rate increases by the conclusion of 2026, showing minimal variation from Tuesday, as per the source. The United States has initiated a 12th consecutive night of strikes against targets in Iran, following Tehran’s threats to escalate its own attacks throughout the Gulf region. US President Donald Trump issued a warning to bomb a bridge or power plant for each ship that is targeted in the Strait of Hormuz.
On Thursday, Kuwait’s army announced that it is intercepting hostile drones, following several days of Iranian strikes on the nation. Meanwhile, Iran’s semi-official Mehr reported that a location near Ahwaz was struck in a US missile attack. Rising tensions and indications of a prolonged conflict in the Middle East may enhance the appeal of a safe-haven currency like the US Dollar relative to the British Pound in the short term.