GBP/USD was little changed on Wednesday, trading near 1.3514, as tensions stayed high and there was no clear progress on US–Iran talks. With no major US data, traders focused on UK inflation figures linked to an energy shock.
US shares were higher, but further conflict could lift demand for safe-haven assets such as the US Dollar. The US Dollar Index (DXY) was 98.44, up 0.03%.
Iran was reported as having no plans to negotiate with the US on Friday. Reuters initially reported a 3–5 day ceasefire window, then corrected to say there was no timeline, while Donald Trump said he would wait for Iran’s proposal.
UK CPI in March rose 3.3% year on year, in line with expectations. Core CPI eased from 3.2% to 3.1%, and the ONS said factory-gate prices were above estimates.
The BoE previously expected inflation to move closer to 2% in April, but later lifted its projection to 3.5%, while the IMF forecast 4%. Markets expect no rate change for two meetings, with July 29 pricing near 48% for a 25 bps hike.
Technically, GBP/USD held above the 50-, 100- and 200-day SMAs near 1.3417. Resistance sits at 1.3855 and near 1.3869, with support around 1.3417.
We look back at the situation in 2025, when UK inflation was at 3.3% and geopolitical risks were centered on Iran. Today, on April 22, 2026, headline CPI has eased to 2.8% but remains stubbornly above the Bank of England’s target. The market’s focus has now shifted, but the potential for sudden flights to safety in the US dollar persists.
A year ago, we saw markets pricing in a 48% chance of a BoE rate hike for July 2025. In contrast, with the Bank Rate now at 4.75%, overnight index swaps are pricing in a 65% probability of a 25-basis-point cut by August 2026. This growing policy divergence with the Federal Reserve suggests traders should consider buying GBP/USD put options to hedge against or profit from a potential decline.
While the pair was holding above 1.3400 in early 2025, today it is consolidating in a tighter range around 1.2950. Three-month implied volatility for GBP/USD has fallen to 6.2%, down from over 8% during the geopolitical flare-ups last year. For traders who believe the pair will remain range-bound ahead of the next central bank meetings, selling out-of-the-money strangles could be a viable strategy to collect premium.
The dynamic of a flight to safety remains critical, just as it was during the US-Iran tensions in 2025. The US Dollar Index (DXY) is currently trading near 104.5, significantly higher than the 98.44 level seen then, reflecting a broader risk-off sentiment. Traders should remain long on dollar call options against a basket of currencies as a portfolio hedge against any unforeseen escalation in global conflicts.
