Finance
Pound edges up as investors focus on middle east and bank of England
Published by Global Banking & Finance Review®
Posted on March 16, 2026
3 min readLast updated: March 16, 2026
Quick Summary
Sterling modestly rose to $1.3248 as investors weighed Middle East conflict risks and awaited Thursday’s Bank of England policy decision. Markets expect rates to stay at 3.75%, with one hike possible by year-end amid fading swap and yield-based rate-cut bets.
Pound Edges Up as Middle East Uncertainty and BoE Policy Decision Loom
Market Reactions and Economic Outlook
LONDON, March 16 (Reuters) - The pound rose for the first time in a week on Monday, but uncertainty over the longer-term impact on global growth and inflation from war in the Middle East kept it near three-month lows as investors favoured the U.S. dollar as a safe haven.
Bank of England Policy Decision
The Bank of England delivers its decision on monetary policy on Thursday and is widely expected to keep interest rates unchanged at 3.75%.
Market Expectations for Interest Rates
Markets are close to pricing in one rate hike by the end of the year and investors want to know how closely this aligns with the views of Governor Andrew Bailey and other BoE policymakers.
Pre-War Rate Cut Assumptions
Prior to the outbreak of the war, the markets had priced in two rate cuts.
Sterling Performance Against Other Currencies
STERLING FARES BETTER THAN SOME CURRENCIES
Sterling was last up 0.2% on the day at $1.3248, narrowly above Friday's trough at $1.3222, the lowest since early December. The pound was steady against the euro at 86.37 pence.
Safe Haven Flows and Comparative Losses
Since the start of the war on Iran, the dollar has been investors' haven of choice, even more than gold, government bonds and other defensive currencies such as the Swiss franc.
Sterling has fared slightly better than the Japanese yen or the euro, which have lost 2% and 3% in value, respectively, in the last three weeks, compared with the pound's 1.7% loss.
Factors Supporting Sterling
This is in part because of the UK's slightly lower reliance on energy imports than that of the euro zone, or Japan, and also Britain's higher borrowing rates.
UK Economic Data and Future Outlook
UK jobs data later this week could help to shape expectations for the longer-term outlook for BoE policy. Employment is softening and wage growth, which has proven particularly resilient, has also started to show signs of abating.
Expert Commentary
“A weaker job market, combined with persistent inflation, has contributed to sluggish economic growth. With oil prices rising and markets now expecting fewer interest rate cuts globally, the pound could face additional pressure if labour market conditions continue to deteriorate," Laurence Booth, global head of capital markets at CMC Markets, said in a note.
(Reporting by Amanda Cooper; Editing by Barbara Lewis)
Key Takeaways
- •Pound edged up 0.2% to $1.3248, still near three‑month lows amid heightened Middle East tensions that pushed investors toward the U.S. dollar safe haven.
- •Bank of England is expected to hold rates at 3.75% on Thursday; markets have shifted from pricing in cuts to pricing in a possible hike by year‑end.
- •Rising oil and gas prices amid the Iran war fuel inflation concerns and delay expected rate cuts—firms now expect around 50 bps of cuts by year‑end rather than earlier reductions.
Frequently Asked Questions about Pound edges up as investors focus on Middle East and Bank of England
1Why did the pound rise despite Middle East tensions?
The pound rose slightly due to lower UK reliance on energy imports and higher borrowing rates, despite global uncertainty from the conflict in the Middle East.
2What is the Bank of England expected to do with interest rates?
The Bank of England is widely expected to keep interest rates unchanged at 3.75% during its next policy decision.
3How has sterling fared compared to other major currencies?
Sterling has performed better than the Japanese yen and the euro, with smaller recent declines relative to these currencies.
4What factors could put pressure on the pound?
A weaker UK job market, persistent inflation, and global shifts away from expected rate cuts could add pressure to the pound.
5How might UK jobs data influence the Bank of England's outlook?
Upcoming UK employment and wage growth figures are likely to shape expectations for the Bank of England's future monetary policy.
