Published by Global Banking & Finance Review®
Posted on March 10, 2026
2 min readLast updated: April 1, 2026
Add as preferred source on GoogleSterling rose modestly as easing oil prices—driven by hopes of de-escalation in the Middle East—relieved inflation fears, while markets increasingly price in Bank of England rate cuts in coming months.
By Niket Nishant
LONDON, March 10 (Reuters) - The pound edged higher against the dollar on Tuesday as hopes of a de-escalation in the Middle East conflict pushed oil prices lower and eased inflation concerns for Britain's import-dependent economy.
Sterling rose 0.1% to $1.3454 against the dollar. It was a touch lower versus the euro at 86.52 pence.
"The UK fundamentals are pretty poor, but in these situations you tend to see that a shakeout is followed by a recovery as investors rebalance," said Nick Kennedy, FX strategist at Lloyds.
The currency has lost 0.3% against the dollar so far this month.
Given the far-reaching implications for the global economy, investors remain on edge and are scanning for even the smallest signs of relief in the conflict involving the U.S., Israel and Iran.
However, conflicting signals from Washington and Tehran prompted analysts to urge caution.
While U.S. President Donald Trump hinted that the war may end sooner than his initial timeline, Iran's Revolutionary Guards were defiant, saying they would not let oil shipments through the Strait of Hormuz until attacks from the U.S. and Israel stop.
Standard Chartered and Morgan Stanley now expect the Bank of England to cut interest rates in the second quarter, delaying earlier forecasts.
Elsewhere, the euro inched up against the dollar at $1.1639, while the yen was flat at 157.77 per dollar.
DOMESTIC RISKS REMAIN
Beyond the hit from higher oil prices, the pound has also been weakened by subdued economic data and domestic political turbulence in recent weeks.
"With focus squarely on the Middle East, UK domestic issues have taken a back seat," BofA Securities' strategists wrote.
"However, with the May local elections barely two months away, we think markets are underpricing a renewed rise in domestic political uncertainty."
British government bonds also looked to reclaim some ground after Monday's plunge.
The yield on the two-year gilt, which moves inversely to prices, fell 6 basis points after climbing 10.7 bps in the previous session.
(Reporting by Niket NishantEditing by Gareth Jones)
The pound rose against the dollar as lower oil prices eased inflation concerns in the UK, boosted by hopes of de-escalation in the Middle East conflict.
Lower oil prices have reduced inflationary pressure in Britain's import-dependent economy, offering relief to investors.
Investors are closely monitoring for signs of relief or escalation in the Middle East conflict, as it greatly impacts global markets and oil prices.
Standard Chartered and Morgan Stanley expect the Bank of England to cut interest rates in the second quarter, delaying earlier forecasts.
Subdued economic data and increased political uncertainty due to the upcoming May local elections have also weakened the pound.
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