Pound Weakens Against Dollar Amid Easing Safe-Haven Demand

The British Pound (GBP) weakened against the US Dollar (USD) despite easing safe-haven demand, driven by diplomatic progress between the US and Iran. The GBP/USD pair fell to around 1.3450 during Asian hours on Wednesday as the USD gained momentum, supported by a rebound in the benchmark 10-year US Treasury yield.

The initial slide in yields was caused by falling energy prices, which cooled inflation fears and tempered expectations of a hawkish response from the Federal Reserve (Fed). However, this easing of safe-haven demand may challenge the Greenback's gains as building diplomatic momentum around a potential agreement to reopen the Strait of Hormuz reduces concerns about Middle East tensions.

The Bank of England (BoE) signaled no rush to tighten monetary policy in its recent meeting, leading markets to dial back expectations for interest rate hikes in 2026. Strategists at Scotiabank described the outlook for the Pound as 'neutral/bullish', noting that Sterling continues to chop around the 100- and 200-day moving averages.