Sterling Pauses After Four-Week Rally Amid Iran Sanctions Uncertainty

The British pound edged lower against the US dollar on Monday after a four-week rally due to investor concerns over the potential implications of US sanctions on Iran and its trading partners.

Sterling has been one of the best-performing Group of Seven currencies this year, supported by expectations that the Bank of England could raise interest rates toward the end of the year and signs of resilience in the UK economy.

Market pricing shows traders expecting benchmark interest rates to rise by at least 25 basis points by December, according to LSEG data. However, most economists expect no change, which could weigh on sterling if market expectations shift to this consensus.

Economist Maelle Quillevere from UBS Global Wealth Management believes that resilient growth and easing domestic inflation pressures support the view that there is no need to tighten monetary policy this year, with potential rate cuts resuming in 2027.