Pound Surges on Hopes of Iran-US Deal

The British pound rose above $1.345 as improving risk sentiment supported demand for risk-sensitive currencies. This followed growing optimism that the US and Iran could reach a deal to end their five-month conflict and reopen the Strait of Hormuz.

Crude oil prices have fallen about 10% this week after US President Donald Trump said the two countries were engaged in 'very good discussions,' raising hopes of a recovery in Middle Eastern energy supplies.

Lower energy prices have eased concerns over inflation and weaker economic growth, reinforcing expectations that the Bank of England will take a gradual approach to policy tightening. Last week's Bank of England meeting strengthened this view, with Governor Andrew Bailey downplaying the need for further rate hikes and saying the disinflation process remains on track.