Published by Global Banking & Finance Review®
Posted on March 24, 2026
3 min readLast updated: March 24, 2026
Add as preferred source on GoogleThe pound slipped ~0.4% to ~$1.3405 on March 24, giving back gains after Trump’s mention of “productive” U.S.–Iran talks was denied by Iran. UK business activity growth slowed—input costs rose at the fastest pace since 1992—while the BoE held rates at 3.75% and signaled willingness to hike amid infl
By Samuel Indyk
LONDON, March 24 (Reuters) - The British pound fell against the dollar on Tuesday, reversing some of its rise from the day before, as the Middle East war continues to hold sway over markets and as signs emerged that the conflict was starting to affect Britain's economy.
The pound was last down 0.4% against the dollar at $1.3405, after jumping 0.9% the day before when President Donald Trump said the U.S. had held "productive" talks with Iranian officials over the conflict.
Iran denied it had engaged in any direct negotiations, calling Trump's comments "fake news", which has put a cap on the pound's rebound against the dollar.
"We remain concerned that market sentiment will remain tense as Iran quickly denied claims of any negotiations having taken place," said Jens Nærvig Pedersen, FX and rates strategist at Danske Bank.
British business activity grew at the slowest pace in six months in March, a survey showed on Tuesday, one of the first signs that war in the Middle East was having an impact on the British economy.
Price pressures also showed signs of increasing, with manufacturers' input costs seeing the biggest month-on-month acceleration since 1992.
"The persistence of the shock will determine how much this will feed into UK households and firms," said Tommy von Brömsen, FX strategist at Handelsbanken.
"If this (the Middle East conflict) goes on for a few more weeks, then maybe the UK stands to lose more than others and that will be pound negative," he said.
Last week, the Bank of England's rate-setters said they were "ready to act" to see off risks to the economy from the war, pushing investors to ramp up expectations for rate hikes this year as they expect the central bank to focus on inflation risks.
Markets are betting that the BoE will raise rates at least twice in 2026 to stop higher inflation expectations from becoming embedded in the economy. Prior to the conflict, investors had expected the BoE to lower borrowing costs twice this year.
"More data is needed to assess both the magnitude of the impact and the likely pass-through of higher energy costs to broader inflation," said Nick Rees, head of macro research at Monex.
"Absent that, we expect rate-setters to remain in wait-and-see mode, with the April PMIs likely to be a key watch ahead of the next round of monetary policy decisions."
Against the euro, the pound was little changed at 86.48 pence.
(Reporting by Samuel Indyk; Editing by Alex Richardson)
The pound fell due to ongoing conflict in the Middle East affecting market sentiment and uncertainty about negotiations between the U.S. and Iran.
The Iran conflict has slowed British business activity growth to its weakest in six months and increased manufacturing input costs.
The Bank of England stated it is ready to act to counter economic risks from the war, with markets expecting rate hikes to combat inflation.
Investors now expect the BoE to raise rates at least twice in 2026 to address inflation risks driven by higher energy costs and market uncertainty.
The pound remained little changed against the euro, trading at 86.48 pence.
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