GBP Surges 0.23% Amid US-Iran Conflict and Inflation Fears

The British Pound strengthened against the US Dollar on Monday as the US-Iran conflict escalated around the Strait of Hormuz.

Overnight, the US launched attacks on three Iranian tankers in retaliation for Iran's targeting of US Navy warships with ballistic missiles. The UK's Chancellor Healey recently pledged to give regions more power to attract private investment and maintain fiscal discipline, boosting Britain's credibility in the bond market.

The GBP/USD rose by 0.23% to 1.3541, while the US Dollar Index fell 0.29% to 98.87. Traders are now focusing on the upcoming release of US inflation prints, which could affect the Federal Reserve's decision to raise interest rates.

With a 63% chance of a 25-basis-point rate increase priced in by money markets for the September meeting, a benign reading could deter the Fed from raising rates. On the other hand, a jump in inflation could push the Fed to raise rates, contrary to President Trump's preference for lower interest rates.